Avalara > Blog > Sales and Use Tax > Small business incentives for filing sales tax on time

Which states offer the best incentives for filing sales tax on time?

  • Dec 20, 2016 | Scott Peterson

When you’re a small business, collecting and filing sales taxes can seem like a thankless task. But it’s important for small businesses to get sales taxes right because many simply can’t afford to get audited or pay fines or penalties for noncompliance.

But there are some states that use a carrot rather than just a stick to give businesses incentives to get their sales taxes done on time. These states offer rewards in the form of a discount on the amount of tax due when sales tax returns are filed and paid on time. These discounts can range from .5% to 5%, with various minimum and maximum amounts.

The following states offer timely discounts: Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Nebraska, Nevada, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Virginia and Wisconsin.

The discounts that these states offer vary widely. On the low end, Nevada offers a discount of only 0.25%, with no minimum. On the other end of the scale, both New York and Alabama offer discounts of 5%, although in Alabama, that rate is only offered on the first $100 of tax due, with 2% off all tax over $100, up to a discount of $400 per month. New York, meanwhile, caps its discount at a maximum of $200 per quarter.

The highest maximum discount offered by any state is Michigan’s max of $15,000 per month, although you’d have to pay a whole lot of tax to get the maximum at the state’s discount rate of 0.5%.

Meanwhile, the state that offers the highest potential total discount is Colorado, which offers a discount of 3.33%, with no maximum.

And the award for most complicated rate probably goes to Virginia, which offers a discount of 1.6% on the first $62,500 and 0.8% on any remaining tax revenue, plus an additional 1% for local tax.

For all the states and their timely discounts for on-time filing and payment, see the chart below.

State Timely Discount
Alabama 5% of the first $100 due, 2% of all tax over $100. Maximum $400 per month.
Arizona 1%. Maximum $10,000.
Arkansas 2%. Maximum $1,000 per month.
Colorado 3.33%. No maximum.
Florida 2.5% of the first $1,200 due if filed electronically. Maximum $30.
Georgia 3% of the first $500 due, 0.5% on any remaining amount. No maximum.
Illinois 1.75%. Minimum $5 per year. No maximum.
Indiana .083% discount if total annual sales tax collected is less than $60,000; 0.6% discount of total between $60,000 and $600,000; 0.3% discount of total of more than $600,000.
Kentucky 1.75% of first $1,000 and 1.5% of all remaining sales tax. Maximum $50 per month.
Louisiana 0.935%. No maximum.
Maryland 1.2% of first $6,000 and 0.9% of the remainder. Maximum $500 per return.
Michigan 0.5%. Minimum $6. Maximum $15,000 per month.
Mississippi 2%. Maximum $50 per month.
Missouri 2%. No maximum.
Nebraska 2.5%. Maximum $75 per month.
Nevada 0.25%. No minimum.
New York 5%. Maximum $200 per quarter.
North Dakota 1.5%. Maximum $110 per month.
Ohio 0.75%. No maximum.
Oklahoma 1%. Maximum $2,500 per month.
Pennsylvania The lesser of $25 or 1% for a monthly filer; $75 or 1% for a quarterly filer; and $150 or 1% for a semi-annual filer.
South Carolina 3% of the first $100 of tax due, 2% for all remaining sales tax. Maximum $3,100 per year.
South Dakota 1.5% when filing electronically. Maximum $70 per reporting period.
Texas 0.5%. Quarterly and monthly filers who prepay 90% of the total sales tax due for the entire reporting period can earn an additional 1.25% discount.
Utah 1.31% plus an additional vendor discount of 1.25% for local sales tax filing. No maximum.
Virginia 1.6% on the first $62,500 and 0.8% on any remaining tax revenue, plus an additional 1% for local tax.
Wisconsin 0.5%. Minimum $10 per filing period.

Need help keeping track of sales tax filing due dates? Automated sales tax filing software, such as Avalara TrustFile, can offer a solution. TrustFile makes it easy to compile returns and is constantly updated so that you’ll never miss a deadline. Learn more here.

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.