Do I Have to Report My Sales Tax Even If I Don't Owe Any?
- Mar 9, 2016 | Avalara
If you don't owe sales tax to a state in which you do business, are you still required to file a tax return with state authorities?
It's a great question for every online seller to consider, because you never know if and when you might encounter this scenario.
Online sellers must monitor where they have sales tax nexus (i.e., where they have a physical presence of some kind). Sales tax nexus requires these sellers to pay taxes on sales made to residents in that state, and also in some cases to file a tax return even if you don't owe sales tax.
For instance, your online clothing business may sell its t-shirts nationwide but fail to make any sales in California, where your warehouse gives you nexus. Even though it might seem like you don't need to file a return there, the California Board of Equalization (BOE) requires your business to do so.
Know the Laws
As an online seller, you must comply with state regulations; otherwise, you could face steep fees and penalties due to non-compliance with these requirements. However, state regulations vary, particularly when it comes to zero sales tax filings.
Here's a closer look at five different states that require sellers to remit sales tax filings even when they haven't made any sales in the reporting period.
The Alabama Department of Revenue states online sellers must file a sales tax return for a month in which it had no sales.
Therefore, when it comes to your online business, you'll need to file a tax return for each month after you've established a tax account in Alabama. This holds true regardless of whether you owe sales tax in a particular month.
In Florida, you must file a tax return, even when no sales tax is due.
The Florida Department of Revenue (DOR) points out that online sellers must determine if their business activities or products are subject to sales tax, which applies to the sale, rental, lease, or license to use certain property or goods (tangible personal property) and services statewide.
3. New York
The New York Department of Taxation and Finance notes that if you're registered for sales tax purposes in New York State, you must file sales tax returns. And even if your business did not make any taxable sales or purchases during the reporting period, you must file a sales tax return.
In addition, penalty and interest are calculated on the amount of taxes due in New York State. And the minimum penalty for late filing is $50, even if no tax is due for the reporting period.
4. South Carolina
In South Carolina, sales tax is imposed on the sale of certain goods and services, and a tax return is due even if you had no sales for the month.
All retail sales are subject to sales tax in South Carolina, according to the state's DOR. Furthermore, the statewide sales tax rate is 6 percent, but counties may impose an additional 1 percent local sales tax if voters in that county approve the tax.
Texas imposes a state sales tax on all retail sales, leases and rentals of most goods, as well as taxable services, the Texas Comptroller of Public Accounts reports. Meanwhile, Texas cities, counties, transit authorities, and special purpose districts have the option of imposing an additional local sales tax for a combined state and local tax rate of up to 8.25 percent as well.
Online sellers also should keep in mind that Texas law imposes a $50 late filing penalty on every report filed after the due date, even if no tax was due for a reporting period.
Other states don't require sellers with no sales in a reporting period to submit a return. Each state has its own sales tax laws, so it's important to learn those that apply to your business. All these diverse laws can sometimes can make it difficult for online sellers to manage their tax returns. Fortunately, dependable sales tax filing software like Avalara TrustFile can make it simple for online sellers to file what they're required to pay in every state.