Sales Tax 101 States

Sales Tax by State: How to Discount Your Sales Tax Bill

by Mark Faggiano

sales tax discounts

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 24 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.

Alabama
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 percent on the first $100 of tax due, and 2 percent of all tax over $100. Monthly discounts can’t go above $400.00.

Arizona (FBA State)
As long as the tax is paid on time, a discount is available equal to 1% of sales tax due and is not to exceed $10,000 per calendar year.

Arkansas
You get to retain 2 percent of sales tax collected ($1,000 per month maximum) as a collection fee if you pay before the sales tax deadline.

Florida (FBA State, AutoFile State)
If you electronically file (e-file) your return and electronically pay (e-pay) tax timely, you are entitled to receive a collection allowance.  The collection allowance is 2.5 percent (0.025 of the first $1,200 of the Amount Due (Line 10), not to exceed $30.

Only dealers who e-file and e-pay timely may receive a collection allowance, and may choose to donate the allowance to the Educational Enhancement Trust Fund. Dealers who file their returns or make payments by a method other than electronic means are not entitled to a collection allowance.

Georgia (AutoFile State)
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.

Illinois (Future FBA State)
The discount for paying on time is the greater of 1.75% of tax due or $5 for the calendar year.

Indiana (FBA State, AutoFile State)
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.

Kentucky (FBA State, AutoFile State)
You may keep 1.75 percent of the first $1,000 and 1 percent 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. Compensation is not allowed on returns filed or paid late.

Louisiana
If paying on time, a discount of 1.1% of tax due is available.

Maryland (FBA State, AutoFile State)
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 percent of the first $6,000 collected and 0.9 percent for the amount above $6,000. The discount is capped at $500 for each return. Here’s more info about Maryland sales tax discounts.

Mississippi
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 percent of tax due, not to exceed $50 per month and $800 per year.

Missouri (AutoFile State)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!

New York
A discount of 5% of tax due is available. The maximum is not to exceed $200 per quarter or longer period.

North Dakota
A discount is available of 1.5% tax due. The maximum discount amount available is $93 per month.

Ohio
The discount rate is 0.75 of 1 percent (0.0075) of the tax liability reported on line 6 of the Universal Sales Tax (UST-1) return. The discount only applies if the UST-1 return and full payment are received by the Ohio Department of Taxation on or before the due date.

Oklahoma (AutoFile State)
If paid on time, a sales tax discount of 1% is available. The maximum discount is $2500 per month.

Pennsylvania (FBA State, AutoFileState)
A discount of 1 percent 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.

South Carolina (FBA State, AutoFileState)
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 percent of the total tax due. For returns showing a total tax due (state and local) of $100.00 or more, the discount is 2 percent 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.

Tennessee (FBA State, AutoFile State)
This discount is only for out-of-state taxpayers filing voluntarily, but that will cover a lot of FBA sellers! This discount is 2% of the first $2500 of sales tax due and 1.15% of the excess amount per reporting period.

Texas (FBA State)
A discount is available of 0.5% of tax due plus 1.25% of the amount of any prepaid tax you may have paid.

Utah (AutoFile State)
Sellers who file monthly returns timely qualify for a 1.31 percent seller discount on certain sales and use taxes.

Virginia (FBA State)
As long as your business doesn’t owe more than $20,000 in sales tax (on average), 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 state encourages you to refer to the corresponding instructions for additional information on computing the discount, as discount factors vary by tax type.

Wisconsin (FBA State, AutoFile State)
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 percent of a retailer’s sales and use tax payable, with the exception listed on page 26 (PDF). There is a limit of $1,000 per reporting period.

Wyoming
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 per period, and 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!

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