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Top 5 sales tax filing mistakes that small businesses make

  • Oct 14, 2016 | Scott Peterson

Stack of sales tax files

We all make mistakes. And when you’re a small business filing sales taxes, it’s easy to do. After all, chances are, you’re not a sales tax expert.

While we believe that to err is human and to forgive divine, we also think taking steps to avoid errors is the best way to go. Here are some common mistakes to watch out for when you’re filing sales taxes (and how to avoid them).

1. Failing to keep track of different rules for different states

One thing that makes sales tax compliance challenging is that every single state has its own rules and procedures. You may be dealing with several different due dates, filing frequencies, formats, late penalties and other variables and it can be easy to mix them up. Making sure you are getting it right for each state also means making sure you are updated on the latest requirements, which can and do change.

2. Reporting incorrect numbers

If your sales tax data is scattered across several platforms and possibly several states, it can be easy to make mistakes when you are adding things up for each state report. Many states require you to break down your collections based on jurisdiction, which adds another layer of complexity. It takes careful computation and checking to make sure you are getting your numbers right.

3. Not filing because you didn’t collect any tax

You may think that because you didn’t collect any tax, you don’t have to file for that reporting period. The truth is, however, that most states require you to file every reporting period, even if you didn’t collect anything. Disregarding this requirement could result in late/nonfiling penalties.

4. Missing due dates

When you register with a state, you should be assigned a filing frequency (monthly, quarterly, annually or other). These frequencies each come with own due dates. Although the due date may officially be the same day of the month each reporting period, these can actually move around due to holidays, weekends, etc. So it’s crucial to check the exact dates rather than just assume that you know when they are.

If you are filing/paying electronically, your payment may not always be credited the same day you submit it, so it’s also important to know how far in advance you need to initiate a payment in order to meet the due date.

5. Ignoring late/nonfiling penalties

All states impose penalties when you fail to file and/or pay on time. Sometimes these can compound quickly with interest. While the best policy is to always be on time, if you can’t, you need to know exactly what kind of a penalty hit you will take for missing the deadline. Otherwise, you may get an unpleasant surprise.

Simple solution

Automation, such as Avalara’s TrustFile software, can help you avoid many errors—and save you a lot of time. For example, TrustFile can automatically take all your sales data and quickly generate completely accurate reports for each state, broken down according to the state’s requirement. TrustFile is constantly updated on the latest requirements for each state, so you will always have the right information on when and how to file.

Special plans for small businesses make TrustFile an affordable option that can help you file your sales taxes correctly and confidently. Learn more now.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Scott Peterson
Avalara Author Scott Peterson
Scott Peterson is the Vice President of U.S. Tax Policy and Government Relations for Avalara, Inc. In his role, Scott leads Avalara’s effort to be the first name in sales tax automation. Prior to joining Avalara Scott was the first Executive Director of the Streamlined Sales Tax Governing Board. For seven years Scott acted as the chief operating officer of an organization devoted to making sales tax simpler and more uniform for the benefit of business. Before joining Streamline Scott spent ten years as the Director of the South Dakota Sales Tax Division where he was responsible for the state sales and use tax, the state’s contractor’s excise tax, the sales and use tax for over two hundred cities, and the sales and use tax for four tribal governments.