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How to Calculate, Complete, and File Your October Sales Tax

This post is for educational purposes only. For specific tax advice related to your business, consult a reputable accountant.
Square
Editorial Team

Ah, taxes. Never a fun task. Luckily, we have our friends over at TaxJar here to help you through what you need to know as a small business owner. To make doing taxes a breeze, be sure to link your Square account to the TaxJar app. (Learn more about how to do that in our Square App Marketplace.)

As Q4 kicks off, taxes are probably the last thing you want to think about (especially as you’re gearing up for the holidays). But unfortunately, October is one of the sales tax biggies. Your quarterly sales taxes are due.

If you sell goods, you probably have to deal with sales tax. Each state assigns merchants due dates for quarterly sales tax. In Q4, it’s usually before Halloween rolls around. (You can check when October sales tax is due in your state here.)

If you don’t file sales tax often, you may have forgotten the basics. So we’re here with your quick fall refresher. Read over these tips so you can file stress-free and get back to doing what you do best — running and growing your business.

Figure out where you have sales tax nexus.

Sales or use tax nexus means that you have “significant” presence in a state. You’ll always have nexus in your home state where you run your business, but some business activities can cause nexus in other states, too. Maybe you sold your goods at an event in another state, for example.

Big sales tax due dates like this one are also a good time to evaluate your business and determine whether you have sales or use tax nexus in any new states. You may also determine that you no longer have sales tax nexus in a state. (Perhaps you sold at an out-of-state craft fair last summer but decided not to attend again this year).

If you find you no longer have sales tax nexus in a certain state, you should contact that state’s department of revenue and let it know. While you may have “trailing nexus” for a period of time, this will be your first step in severing your business relationship with that state (and thus avoiding collecting sales tax from customers there). To learn more about sales tax nexus, check out our guide.

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Make sure you’re registered for the sales tax permit(s) you need.

Once you have nexus in a state, that state requires you to register for a sales tax permit before collecting sales tax from buyers. Many states even see it as unlawful to collect sales tax without a permit. (In their suspicious eyes, merchants might tell customers they’re collecting sales tax but then pocket the difference.)

So make sure you’re registered for a sales tax permit in every state in which you’re collecting sales tax.

Determine your sales tax filing due dates.

When you register for your sales tax permit, the state also assigns your sales tax filing due dates. You generally file and pay sales tax either monthly, quarterly, or annually.

Your filing frequency usually depends on your sales volume. The more you sell, the more often you file. The exception to this rule is that some states ask for monthly sales tax filings in your first year as they evaluate your business.

To help you out, here’s a handy list of sales tax filing due dates for October 2015. At TaxJar, we call October a “sales tax perfect storm” because almost all sellers have a filing due date.

Calculate how much you owe.

Once you determine that you need to file, it’s time to calculate how much sales tax you should remit to the state. This means determining exactly how much you collected from buyers. Don’t forget to include sales tax collected through Square and any other platforms through which you sold. Did a customer write you a check? Be sure to include the sales tax you collected there, too.

If you only sell on one platform (like Square) and only have sales tax nexus in one state, then figuring out how much sales tax you collected can be pretty easy. But if you sell on multiple platforms, it gets harder and harder.

And then there’s the actual sales tax form that must be completed. Most U.S. states are “destination-based sales tax” states. What that jargon means is that they want to see how much sales tax you collected broken down by city, county, or other special taxing district. This is where sales tax gets stratospherically complicated. Check out TaxJar’s website if you need help determining just how much sales tax you collected and filling out your sales tax returns.

File your sales tax returns.

Once you’ve figured out all the hard stuff — how much sales tax you collected and where you collected it — then it’s time to file your sales tax return. You have a few options here:

  • File by mail: Slow and cumbersome — many states are even discontinuing this feature.
  • File online: Find your state’s sales tax portal online and fill out its detailed form, then submit a payment through its (often separate) payment system.
  • AutoFile: TaxJar will file your sales tax for you in 26 states (and counting). No reporting, no forms. It’s automatic. AutoFile even factors in the little-known sales tax discounts that many states give you for filing on time.

Use tax versus sales tax

As a small business owner, you may also hear the concept of “use tax” thrown around. Generally speaking, “use tax” and “sales tax” are the same thing, just applied to different merchants (you can read up on it here). Use tax is what states call a tax collected and remitted by a “remote seller.” So if you sell in another state, it’s worth consulting with your accountant on this one.

And that’s it. You’re done with October sales tax. Now you can get back to your business (or the beach).

Mark Faggiano (TaxJar)

About TaxJar

Sales tax is complex. That’s why we created TaxJar — to handle the burden of sales tax while you get back to running your business. TaxJar pulls in sales tax collected from all the channels where you sell, compiles your data into return-ready reports, and can even AutoFile your sales tax returns for you in 26 states (and counting). Sign up for a 30-day TaxJar free trial today and put a lid on sales tax. And check out Square App Marketplace for more information on how to link your Square account to TaxJar’s tools.

The Square Editorial Team is dedicated to telling stories of business, for business owners. Our team comes from a variety of backgrounds and share a passion for providing information that helps businesses to start, run, and grow. The team is based in San Francisco, but has collaborators all over the country.