3 Ways Businesses Can Save Money on Sales Tax
- Sep 18, 2015 | Stephanie Faris
Dealing with sales tax is a constant for any business selling taxable goods or services. As you collect taxes, you’re well aware that the money is destined for government coffers. But what if you could keep a little of that money and put it toward your business expenses?
In some states, you may be able to reduce your sales tax burden with minimal effort. Even if you save a small amount of tax to remit each period, the amount you can save will add up over the course of the year. Here are a few tips that can help you cut your sales tax bill.
Pay Sales Tax on Time
In many states, remitting sales tax by a certain date will earn you a small discount commonly known as a Vendor Discount or Seller's Discount.
In Alabama, if a business pays sales tax before the 20th day of their assigned month, the state will discount five percent on the first $100 and two percent on all sales taxes paid above $100. In Texas, businesses are eligible for a 1.5 percent pre-payment discount, and in Maryland, businesses can keep 1.2 percent of the first $6,000 and 0.9 percent of amounts above $6,000 if taxes are paid on time.
Even in states where no discount applies for paying early, it’s important to pay by the date due. Fines, penalties, and interest charges could apply to late payments, costing hundreds or thousands of dollars over the course of the year. If you find it difficult to remember the due date, set a reminder for yourself or create a standing appointment with your accountant to help you file.
Deduct Reporting Expenses
Wisconsin businesses have the benefit of a retailer’s discount, which allows them to claim the cost of reporting and collecting sales tax from customers. The law recognizes the fact that businesses put time and effort into calculating and reporting sales tax. In Wyoming, the discount is 1.95 percent if a business’s sales tax is less than $6,250 for a period and one percent for totals above that amount.
If your state has a similar discount, it’s important to pay close attention to due dates. Often the discount only applies if taxes are paid by a certain date. The discount isn’t applicable for use tax or taxes prepared by a certified service provider who is paid for filing the return.
In Florida, you can earn a collection allowance of up to $30 for filing electronically, as long as you pay on time. This is a refreshing change from states like North Carolina, which charge a fee for filing electronically and paying by credit card.
By e-filing, you’ll also save money on the postage you’d spend mailing a paper return, as well as the extra time it takes to print and mail a return. Even in states that don’t discount for e-filing, some businesses will save money by filing electronically simply because they’d procrastinate paying by mail and incur late fees. Benefits like being able to pay past payments and reprint returns give businesses even more reason to choose to e-file.
Filing sales taxes can be time consuming, but by enjoying a small cost savings, you can offset the burden. Regardless of the sales tax laws in your state, paying on time will always save money, since you’ll avoid the fees that inevitably come with submitting your taxes late. It's also great for overall peace of mind!