Sales tax FAQ: Do I enter gross sales for entire business or just the state I’m filing in?
byJanuary 21, 2021
Thanks to Lauren Stinson of Windward Tax for her assistance on this post.
A frequently asked question from our customers is “When filing sales tax in a state, and the form asks for my ‘gross sales,’ do they want only my sales in that particular state, or my gross sales from my entire business?”
When we started noticing this question crop up more and more, we decided to delve deeper.
When a state asks for “gross sales,” what do they want?
Let’s say your office is located in New York but you sell via Amazon FBA and thus also have nexus in California.
You go to file your sales tax return and one question on the form is “What were your gross sales for this taxable period?”
But you’re confused – does the California Board of Equalization want to know how much in gross sales you made throughout your entire company, or just in the state of California?
Luckily, while sales tax is a huge ordeal, this is somewhat straightforward. States only care about stuff that affects them. If you sold an item to someone in Georgia from your New York office, California doesn’t really care about that. They only care about the sales in California since those are the sales that you must charge sales tax on (and thus the sales that will send revenue their way!)
So, yes, make sure to only input sales (in this example) you sold in the state of California. You only need to remit the sales you made to California customers. Those sales could have come from NY, GA, CA, or where ever – the return only needs to include those going into California.
Dealing with Exemptions and Non-Taxable Sales
So how do sales tax exemptions and non-taxable sales factor into this question? First, sales tax exemptions occur when your customer has a valid reason to not pay sales tax in a state – maybe they are a non-profit or are buying good for resale. Exemptions must be documented with any state where your customer claims to have an exemption.
Non-taxable sales occur when a state doesn’t require your business to charge sales tax on an item. Some states, for instance, don’t require sales tax to be collected on certain food items.
When filing your sales tax return, most states will want you to include your exempt sales and non-taxable sales in the return. The good news is they only want exempt and non-taxable sales that occurred in their state.
Long story short, you don’t have to include your business’s sales in other states on your sales tax filings.
2023 Sales Tax Preparedness Guide
Discover sales tax trends and changes that could impact your compliance in 2023. You’ll also find helpful information on product taxability, and how to manage hitting economic nexus thresholds in new states this shopping season.Read now