Tax compliance requires proper documentation and communication with the taxing entity. For sales tax, this takes the shape of filing monthly (or quarterly or annually!) returns to the states where you do business.

Properly filing a sales tax return can be a lot trickier than it would first appear.

As with most things that are sales tax related, there are a number of different factors that you need to be aware of in order to get the job done right.

Let’s demystify sales tax return preparation! Dive into four key aspects of the process so you can ensure you file your returns correctly the first time and aren’t penalized for errors.

1. Choosing the Right Form

Most states initially send preprinted tax returns to taxpayers unless the taxpayer has registered for e-file status. These forms and the corresponding tax you are required to remit are determined and set up by the state based on the company’s initial registration as a taxpayer in that state. For e-filers, the return is set up in the state’s system based on the registration information provided.

2. Entering the Data in the Form

Sales tax returns start with reporting gross sales. Determining what amount to put on the gross sales line of the return is based not only on what the state indicates but also can be impacted by what data is available to you. Some states feel that gross sales should represent your company-wide gross sales (i.e. everywhere) rather than just gross sales into their jurisdiction.

Generally, most states and taxpayers use the state’s gross sales to be reported within a given jurisdiction. North Carolina, Ohio, and Virginia take this position. However, if there is a sales or distribution office in a given jurisdiction, gross sales is often defined as gross sales by the locations in the jurisdiction. This is the position that Missouri takes.

3. Meeting the Due Date

Once you are registered to collect or pay sales and use taxes in a jurisdiction, you must file tax returns on a timely basis. Upon registration, the jurisdiction will let you know how frequently you must file returns and what the due date is. Common frequencies are quarterly and monthly. Companies with very small tax liabilities may only have to file annually. Companies with very large liabilities may be required to make prepayments – sometimes weekly! The due date applies to both filing the return and payment of tax. For more info you can check out voip taxes and fees

4. Filing the Return

Filing returns in paper format is still used by states for some level of taxpayers. Paper filing is typically accepted for taxpayers with low taxable sales and tax liabilities. Each state provides the forms that must be used for returns. Many states allow replicas of their forms to be used in place of state-supplied returns. Note that some states do not permit substitute forms to be used due to technology limitations. If this is the case, submitting a non-approved form could result in interest and penalties for late filing.

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