After you’ve diligently collected sales taxes from your customers, you need to then transfer that money to the government. This is generally a straightforward process as the government wants to make it easy for you to send over its revenue. However, there are a few points that you need to watch out for when you pay your sales taxes.
Ways to pay
Your options for paying the collected sales taxes will depend on your state. It is common for state governments to accept payment by check, money order, or an electric fund transfer from your bank account. Depending on how much you collect in sales taxes, the government may request a specific form of payment. For example, in Texas if a business paid more than $100,000 in sales and use taxes the previous year, the business owner will only be able to pay sales taxes by an EFT. Some states also give business owners the option to pay by credit card but this can run into problems with the credit card company.
Trouble with corporate credit cards
If you’re planning on paying your sales tax bill with a company credit card, you need to make sure that the payment will go through. Just because your state government accepts payment from a credit card doesn’t mean your credit card company will accept the transaction. Zip2tax has found that some company credit cards block purchases related to sales taxes. Business owners should be able to get this block lifted from their corporate cards, but they need to call customer service and request this change first. If you don’t plan ahead, the mix-up with your credit card could cause your payment to be late.
Dealing with late payment
If you are late on submitting your sales tax return and taxes, you’ll likely owe extra money in penalties and interest. These extra costs will be added to the balance that you need to submit to the government. After you’ve determined how much extra money you need to submit, you should just pay the entire balance as normal; you don’t need to make separate payments for the sales taxes and the penalties.
Benefit of early payment
If you have some extra cash on-hand, you could get a discount on your taxes by paying your sales taxes early. States that offer this option require that you estimate how much you’ll owe for the upcoming period and your estimate needs to be fairly accurate for the discount to apply. For example, in Texas your paid estimate needs to cover at least 90 percent of the taxes you end up actually owing. If you qualify for this discount, Texas will deduct 1.25 percent off your sales tax bill which leaves more money behind for your business.
Handling the payment of your sales taxes should be one of the easier parts of the taxation process. Keep this advice in mind so you don’t make this transaction any more frustrating than it needs to be.