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How to Automate Sales Tax Compliance
Sales Tax by State: How to Discount Your Sales Tax Bill
byDecember 19, 2017
Last updated December 22, 2020
Want some free money?
What a silly question. Of course you do.
A couple of days ago I came across a website called Missing Money. Enter in your name and a state you’ve lived in and Missing Money will tell you whether you have any unclaimed funds stranded out there. The funds can come from anywhere: a bank account you closed by never cashed out, a security deposit refund from a utility company, or maybe even a sales tax refund you never received!
This website made me think of another little known source of free money – sales tax discounts.
That’s right. While I feel like I spend the majority of my time writing about how confusing and frustrating sales tax compliance can be, there are actually some upsides to staying on top of sales tax.
And one of those upsides is that 26 states (and counting) will actually let you keep some of the sales tax you’ve collected if you pay early or on time.
Better yet, if you AutoFile your sales tax in one of these states through TaxJar, we actually collect the discount and pass it all right back to you. It’s a win/win – we do the work and you save money.
Here are all the discounts we’ve found so far. States don’t widely publicize these discounts (go figure), so if you come across another state that discounts sales tax, let us know in the comments.
Important note: Some discounts only apply to certain sellers in certain situations – such as sellers who voluntarily comply with sales tax in remote states. If you do not see the discount on your sales tax filing form, the discount may not apply in your situation. If you feel that it should, always contact your state’s department of revenue or a vetted sales tax expert before assuming a sales tax discount applies to your situation.
A discount is allowed if the tax is paid before the 20th day of the month in which the tax is due. The sales tax discount consists of 5% on the first $100 of tax due, and 2% of all tax in excess of $100. Monthly discounts can’t go above $400.00.
As long as the tax is paid on time, a discount is available equal to 1.2% of transaction privilege tax due and is not to exceed $12,000 per calendar year.
You get to retain 2% of sales tax collected ($1,000 per month maximum) as a collection fee if you pay before the sales tax deadline.
There is a collection allowance is 2.5% (0.025% of the first $1,200 of the Amount Due (Line 10).)
Entities paying sales tax on time can claim a discount of 3% of the first $3,000 dollars of tax due and then 0.5% of the excess amount.
The discount for paying on time is the greater of 1.75% of tax due or $5 for the calendar year.
This one is a little tricky. If total annual sales tax collected was less than $60,000, then you can claim a .083% discount. If total annual sales tax collected was between $60,000 and $600,000 then you can claim a 0.6% discount. And if total annual sales tax collected was more than $600,000 you can claim a 0.3% discount.
You may keep 1.75 percent of the first $1,000 and 1.5% of tax due in excess of $1,000 on each return up to a maximum of $1,500 for reporting and remitting the taxes on or before the due date. The allowance is capped at $50 per reporting period. Compensation is not allowed on returns filed or paid late.
If paying on time, a discount of .935% of tax due is available. This allowance is capped at $1500.
If you file your sales tax return and pay your sales tax on a timely basis, you are allowed to keep a portion of the sales tax as a discount. The allowable discount for timely filing and paying is 1.2% of the first $6,000 collected and 0.9 percent for any excess amount above $6,000. The discount is capped at $500 for each return. Here’s more info about Maryland sales tax discounts.
Warning! This one is highly confusing. For more insight, we recommend contacting the Michigan State Treasury.
Filers may deduct the greater of these two options: 1.) For payments made before the 12th day of the month, 0.75% of tax due at a rate of 4% for the preceding month (maximum of $20,000 tax due). For payments made between the 12th and 20th, .5% of the tax due at a rate of 4% for the preceding month (maximum $15,000 of tax due.) 2.) Or, if greater, they may deduct the tax collected at a rate of 4% on $150 of taxable purchase price for the prior month.
A discount is allowed if the tax is paid by the 20th day of the month in which the tax is due. The sales tax discount is 2% of tax due, not to exceed $50 per month and $600 per year.
As long as your sales tax return is postmarked before the due date, Missouri grants you a 2 percent timely payment allowance. Just take the amount due and subtract 2 percent. That’s free money, so pay on time!
A discount is available of 2.5% of the first $3,000 you remit each month.
A discount of .25% of tax due is available.
A discount of 5% of tax due is available. The maximum is not to exceed $200 per quarter or longer period.
A discount is available of 1.5% tax due. The maximum discount amount available is $110 per month.
The discount rate is 0.75 of 1 percent (0.0075) is available.
For periods ending before August 1, 2016 a discount of 1% of the state and local sales tax collected may be deducted if the return, together with full remittance less proper discount, is filed on or before the due date. (If you pay more than $20,000, make sure you pay by EFT or the discount will be denied.)
For periods ending after August 1, 2016, a cap is imposed. The discount can now be the lesser of $25 or 1% of the sale tax imposed for monthly filers, the lesser of $75 or 1% of sales tax imposed for quarterly filers, or the lesser of $150 or 1% of the sales tax imposed for semi-annual filers.
South Carolina will allow a discount for timely filing a sales and use tax return, provided the taxes due on the return are paid in full and by the due date. For returns showing a total tax due (state and local) of less than $100.00, the discount is 3% of the total tax due. For returns showing a total tax due (state and local) of $100.00 or more, the discount is 2% of the total tax due. The discount is limited to $3,000 per fiscal year. If you file electronically, the discount maximum for a state fiscal year is $3,100 instead of $3,000.
For out of state filers filing voluntarily, the limit is $10,000.
This discount only applies to a very specific set of taxpayers. It is only for out-of-state taxpayers filing voluntarily who have registered through the Streamlined Sale Tax (SST) Initiative. This discount is 2% of the first $2500 of sales tax due and 1.15% of the excess amount per reporting period.
A discount is available of 0.5% of tax due plus 1.25% of the amount of any prepaid tax you may have paid.
Sellers who file monthly returns timely qualify for a 1.31% seller discount on certain sales and use taxes.
Discount for Remote Sellers:
Non-nexus sellers who register for the first time on or after January 1, 2014 may keep 18 percent of the Utah sales tax they collect. To receive this discount, a seller must file electronically using the Tax Commission website (see tap.utah.gov) or the Streamlined Sales and Use Tax Agreement’s simplified electronic return (SER). Sellers that take the 18 percent seller discount may not take the 1.31 percent seller discount for filing monthly. This discount will expire for a non-nexus seller if Congress or the U.S. Supreme Court takes action that requires the seller to collect and pay state sales taxes.
As long as your business doesn’t owe more than $20,000 in sales tax (on average) and you are not required to remit sales tax by electronic funds transfer (EFT), then a discount on the amount of sales tax due is allowed when eligible businesses file and pay the tax in a timely manner. Dealers can keep a portion of the tax they have collected; however, the discount is not allowed on the local portion of the tax.
The compensation available to all other dealers will be limited to the following percentages of the first 3% (4% if this is food tax) of the sales and use tax levied:
monthly taxable sales of $0 to $62,500—1.6%;
monthly taxable sales of $62,501 to $208,000—1.2%; and
monthly taxable sales of $208,001 and above—0.8%.
The state encourages you to refer to the corresponding instructions for additional information on computing the discount, as discount factors vary by tax type.
You can take a credit, which is called the “retailer’s discount.” The discount is not allowed on any tax paid after the due date (or extended, in the case of an extension, after the due date) of the sales and use tax return. The retailer’s discount is 0.5% of a retailer’s sales and use tax payable or $10, whichever is greater.
If taxes are remitted on or before the 15th day of the month, an early payment credit of 1.95% is available on the first $6,250 of taxes due. A 1% credit is available on the excess amount over $6,250 due per period. The maximum credit is $500 per month.
Remember, more states may have discounts for paying on time. Help us build a library of sales tax discounts by leaving any gems you find in the comments!
Ready to automate sales tax compliance? To learn more about TaxJar and get started, visit TaxJar.com/how-it-works.