Filing Sales Tax Returns Accurately and On Time

For many business owners, collecting and remitting sales tax is one of the most confusing and tedious parts of running a business. With different rules by state, product type, and even municipality, it’s easy to make mistakes. But staying compliant is non-negotiable—late filings, underpayments, or errors can result in hefty fines, penalties, and even audits.

The good news? Filing sales tax returns doesn’t have to be stressful. With the right system in place and a clear understanding of your obligations, you can stay on top of your sales tax requirements and avoid trouble.

In this guide, we’ll explain how to file sales tax returns accurately and on time, and share best practices for managing your sales tax process smoothly.

Why Sales Tax Compliance Matters

Sales tax is collected by businesses on behalf of state and local governments. That means you’re acting as a trustee of that money, and the responsibility for collecting, reporting, and remitting it correctly lies with you.

Here’s why proper sales tax filing is essential:

• ✅ Avoid Penalties: States can impose steep late fees and interest on unpaid or late-filed returns.

• ✅ Prevent Audits: Inaccurate reporting is a red flag that can trigger time-consuming audits.

• ✅ Maintain Business Reputation: Non-compliance can affect your relationship with vendors, customers, and authorities.

• ✅ Ensure Accurate Financial Records: Sales tax impacts your cash flow and accounting, so it’s vital to handle correctly.

1. Know Your Nexus

The first step in filing sales tax properly is understanding where your business has a sales tax obligation, also known as nexus.

Nexus is typically established when your business has:

• A physical presence (office, store, warehouse)

• Employees or contractors in a state

• Inventory stored in a state (including Amazon FBA)

• Economic presence (usually sales over a certain threshold)

✅ Tip:

Even if you don’t have a physical presence, many states have economic nexus laws that require you to collect sales tax based on revenue or number of transactions.

Check each state’s threshold on their Department of Revenue website.

2. Register for a Sales Tax Permit

You must register for a sales tax permit in every state where you have nexus before collecting sales tax.

• Apply through the state’s Department of Revenue website.

• Some states charge a fee, while others offer free registration.

• Once registered, you’ll receive a sales tax license and your filing frequency (monthly, quarterly, or annually).

✅ Tip:

Never collect sales tax in a state where you’re not registered—it’s illegal and can trigger fines.

3. Collect Sales Tax Properly

Once you’re registered, make sure you’re collecting the correct rate at the time of sale.

• Some states have a flat rate, while others use destination-based sourcing, where the rate depends on your buyer’s location.

• Use up-to-date tools like TaxJar, Avalara, or QuickBooks Sales Tax to calculate the right rates for each transaction.

✅ Tip:

Double-check exemptions—some products (like groceries or clothing) are tax-exempt or taxed at a reduced rate in certain states.

4. Keep Detailed Sales Records

Proper recordkeeping is critical for filing sales tax returns accurately. Maintain detailed logs of:

• Gross sales (taxable and non-taxable)

• Amount of sales tax collected per jurisdiction

• Exempt sales with valid exemption certificates

• Refunds or returns that affect tax liability

✅ Tip:

Use accounting software that integrates with your sales platform to keep real-time, organized sales tax data.

5. File Sales Tax Returns on Time

States assign your filing frequency based on your sales volume—typically monthly, quarterly, or annually. You’ll need to:

• Report total sales

• Separate taxable from non-taxable sales

• Report sales by jurisdiction

• Submit the amount of tax collected

✅ Tip:

Always file your return even if you made no sales—this is called a “zero return” and skipping it could result in penalties.

6. Automate Sales Tax Reporting

With the complexity of rates and deadlines, automation can be your best friend. Tools like:

• TaxJar – Automates sales tax reporting and filing

• Avalara – Offers real-time rate calculation and automated returns

• QuickBooks Online – Syncs sales data for easy return preparation

These solutions can help ensure accuracy, save time, and eliminate manual errors.

7. Reconcile Before Filing

Before submitting your sales tax return, reconcile your numbers:

• Confirm your gross sales total matches your income report

• Double-check that all exemptions have proper documentation

• Verify the amount of sales tax collected matches what you plan to remit

✅ Tip:

Always download and save copies of your filed returns and payment confirmations for your records.

8. Know the Deadlines

Sales tax due dates vary by state and filing frequency. Missing a deadline can lead to late fees, interest, or even license suspension.

Here’s a general rule of thumb:

• Monthly Filers: Returns usually due on the 20th of the following month

• Quarterly Filers: Due by the end of the month following the quarter

• Annual Filers: Due by January 31st of the following year

✅ Tip:

Set calendar reminders or use automated software that alerts you before due dates.

9. Plan for Sales Tax in Your Cash Flow

Sales tax is not your money—it’s collected on behalf of the state. Set it aside so you’re never short when it’s time to remit.

• Create a separate “Sales Tax” liability account in your bookkeeping system

• Transfer collected tax to a savings account if needed

• Never use sales tax funds for operating expenses

10. Work with a Professional Bookkeeper or Tax Advisor

If your business sells in multiple states or has complex transactions, a professional can:

• Ensure your filings are accurate and timely

• Help you understand multistate obligations

• Prevent costly mistakes and audits

• Guide you on using the right tools and platforms

At TA Bookkeeping, we offer expert support for small business owners navigating sales tax compliance across various industries and platforms.

Conclusion

Filing sales tax returns accurately and on time is not optional—it’s a legal responsibility that can impact your business’s reputation and finances. With proper tools, systems, and support, you can simplify the process and stay in full compliance.

Don’t wait until the deadline to scramble through receipts and reports. Get organized today, automate what you can, and lean on professionals when needed.

Need help managing your sales tax filings? TA Bookkeeping offers stress-free sales tax solutions for small businesses. Fill out the form below to get started today!