Behind on Sales Tax? Move Forward.
Applying for sales tax permits may be simple in a few states and more complex in others. It is essential that you move forward to start collecting and remitting sales tax. If you have a lot more time than money, and are not behind on sales tax, working with the state online may be an option for you. However, if you are looking to spend more of your time focused on marketing and sales, it is best to hire a company to apply for permits for you, so you may focus on profits.
If you have been selling for several months and are behind on collecting and remitting sales tax, you have a few options to get back into compliance. You can move forward and apply for a sales tax permits (at this link), paying the back sales tax, interest, and penalties OR you may opt to participate in the State’s Voluntary Disclosure Program and potentially have the penalty fees waived. Here are the steps to determine how much you may owe in back sales tax, penalties, and interest.
Download sales information from your Amazon Seller Central account:
- Go to Order History Reports.
- Select the report type from the drop-down menu. Fill in the start date, end date, and report name.
- Click “Request Report.”
- When the report is complete, you’ll receive an email notification. To retrieve the report, visit Order History Reports and click “Download.”
- OR, contact TAXIFY at http://go.taxify.co/salestaxsystem to pull these reports for you.
- You will need to subtract all sales that were shipped out of state or refunded.
Total your gross sales and multiply by the state’s average sales tax rate. This will give you a rough idea of how much you potentially owe in back sales tax.
Voluntary Disclosure (VDA) is something a seller must initiate PRIOR to acquiring sales tax permits (exceptions are California and Nevada).
You have options when deciding whether to go through VDA programs or just move forward with sales tax permits, each with varying degrees of risk involved:
VDA Route: Go through state VDA program declaring all past sales. Payback sales tax and interest in approximately 60 days, with penalties waived. (You will be issued a sales tax permit during the VDA process.)
Pay Back Taxes: Use the start date of when you first had nexus and had your first sale after that start date. For example, if you had stock in June but your first sale was August in that state, use the August date to start reporting sales tax and pay the penalties and interest.
Use the current date as your start date and do not claim prior sales. The risk is that if you are ever audited, you must pay back sales tax, interest, and penalties on the sales that were never reported. Plus, you may be subject to FRAUD penalties, that can equal 50-100% of the sales tax owed because you put the wrong start date on the sales tax application.
Sales Tax System staff does NOT directly assist with VDA. We can refer you to a SALT (sales and local tax) expert, but they charge $2,000 to $2,500 per state for Voluntary Disclosure filings.
Are you an Amazon.com FBA seller and not collecting or remitting sales tax?
- Amazon is collecting and remitting in 34 states. See this link for updates. This number will increase over time. There are 8 FBA states currently where you may have stock, and Amazon is not collecting. These include Florida, Georgia, Illinois, Kansas, Michigan, North Carolina, Tennessee, and Wisconsin.
- There are 12 economic nexus states that Amazon is also NOT currently collecting and remitting and they include: Arkansas, D.C., Georgia, Hawaii, Illinois, Kansas, Louisiana, Michigan, Mississippi, North Carolina, Tennessee, and Wisconsin. As you can see, there is some overlap with the 8 FBA states where Amazon is not collecting.
- Washington is the main state where Amazon is collecting and remitting, yet, you are expected to register if you have nexus. The states are making changes in this process and more and more are not expecting you to register if you only sell on Amazon, a marketplace facilitator, in their state.
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