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State discounts for filing sales tax on time

  • Jan 26, 2018 | Gail Cole

Update: Please see the 2019 State discounts for filing sales tax on time.

Dealing with sales and use tax is a thankless task that’s tempting to put off. But if you file on time, you may be rewarded.

While all states penalize businesses for late and incorrect sales tax returns, close to 30 incentivize timely filing by offering a sales tax filing discount to businesses that file returns and remit payments by the due date. Two states even offer additional savings when tax is paid early.

As of Jan. 1, 2018, the following states offer a sales tax early filing discount: 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, Wisconsin, and Wyoming.

Their incentives vary widely. Nevada offers the smallest discount — 0.25% — but has no maximum. Michigan offers a vendor discount of 0.5% and caps savings at a generous $15,000 per month.

At the opposite end of the spectrum, both Alabama and New York allow a discount of up to 5%. Yet Alabama caps savings at $400 per month, while New York allows prompt filers to save only $200 per quarter.

The greatest savings overall can be found in Colorado, where the vendor discount is 3.33% for state sales tax, and between zero and 3.33% for local tax, with no cap.

A few states require minimum discounts. For example, timely filers must claim at least $5 per year in Illinois and $25 per month in Pennsylvania.

As in years past, Virginia wins the prize for the most complex vendor discount. The discount provided for general sales differs from the discount for food sales, and discounts also differ for sales of varying amounts. Furthermore, Virginia provides no discount for local tax or electronically filed returns.

Since even the smallest discounts can lead to substantial savings over time, it’s worth knowing which states offer them. Read on for a list of state discounts for filing and remitting sales tax on time. (Where no minimum or maximum discount is listed, there is no minimum or maximum discount.)

  State                      2018 Sales Tax Early Filing Discounts

   5% on the first $100, 2% on the remainder; maximum of $400 per month
    1%; maximum of $10,000 per year
   2%; maximum of $1,000 per month
  3.33% on state sales tax; 0%–3.33% on local option tax
   2.5%; maximum of $30 per report
   3% on the first $3,000, 0.5% on the remainder
  1.75%; annual minimum of $5
  0.73% if total sales tax collected is less than $60,000; 0.53% if total is between $60,000 and $600,000; 0.26% if total is more than $600,000
   1.75% on the first $1,000, 1.5% on the remainder; maximum of $50 per month
  0.748% (this will increase to 0.935% on July 1, 2018)
  1.2% on annual collections of up to $6,000, 0.9% on the remainder; maximum of $500 per return 
   0.5% on the first 4% of the tax (0.75% if paid by the 12th of the month); minimum of $6 and maximum of $15,000 per month
  2%; maximum of $50 per month
  2.5%; maximum of $75 per month
New York
  5%; maximum of $200 per quarter
North Dakota
  1.5%; maximum of $110 per month
  1%; maximum of $2,500 per month
  1%; minimum of $25 per month
South Carolina 
  3% on the first $100, 2% on the remainder; maximum of $10,000 per year
South Dakota 
  1.5%; maximum of $70 per month; applies to electronic filers only
  0.5%; an additional discount of 1.25% applies to early payments
  1.1% (1.6% for food) on the first $62,500; 0.84% (1.2% for food) on $62,500 to $208,000; 0.56% (0.8% for food) on the remainder; no discount on local tax; no discount for electronically filed returns
   0.5%; minimum of $10 and a maximum of $1,000 per reporting period
  1.95% on the first $6,250, 1% on the remainder; maximum of $500 per month

There is no set discount in Idaho, Maine, or Vermont, but vendors may keep any excess collections prescribed under the bracket system.

Alaska, Delaware, Montana, New Hampshire, and Oregon have no general sales tax. However, New Hampshire provides a discount of 3% for timely filing of its meals and room tax.

Additional constraints may apply in some states. Sales tax filing discounts are subject to change in all states and should always be confirmed before being claimed.

Avalara offers Managed Returns Services that allow you to file on time, every time. Learn more.

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
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.