How To Stay On Top of Sales Tax in 2024

January is a busy month for United States sales tax returns. Verify your upcoming due dates and make a plan to stay organized this year.

by David Toper10 Jan 2024 • 7 min read

an image of a stack of well organized reports

The year has officially kicked off which means it's time to start thinking about filing your sales tax returns. The vast majority of states – 39, including the District of Columbia – have their annual or semi-annual filing deadlines in January. Whether your file annually, semiannually, quarterly, or monthly, you probably have taxes due soon.

Fortunately, Shopify Tax can help you save time and make managing sales tax a little less stressful! To get you started, we've compiled a list of tips and key January deadlines below.

Remember, it's your responsibility to consult with local tax authorities or a tax professional to verify that you’re collecting the correct tax rates from your customers and to ensure you file and remit your taxes correctly. Plus, most of the tax professionals we know are pretty cool people.

Refresh yourself on where you’re currently collecting tax – or may soon need to – and communicate any changes

Did you open a new New York flagship store? Did your recent marketing campaign lead to a spike in sales in Arizona? Big milestones for your business may impact your tax-collection requirements. You may hear the term Nexus used to describe when a business must register and start collecting and remitting sales tax in a particular state. Nexus may be established through a physical presence like a storefront or warehouse, or through an “economic” presence determined by exceeding a defined sales threshold. There’s no better time than the present to make sure you’re on top of your tax requirements. If you use Shopify Tax, you can take advantage of sales tax insights to verify where you’re currently collecting and receive guidance on where else you may be liable today or in the near future.

Create a calendar of your upcoming tax filing deadlines and requirements

Your sales may impact when you need to start collecting tax and your filing frequency. Most of the businesses we speak with start off with annual filing requirements and then increase to quarterly or monthly filing as their business grows. If you’re not sure, now’s a great time to check in with the state's Department of Revenue.

Once you’ve determined your filing frequency, it's a great time to familiarize yourself with key deadlines. We’ve provided January's due dates along with helpful links below. While creating your plan for January, take a bit of time to review and add any other key 2024 dates to your calendar. Your future self will thank you!

Compile your state-level reports

When it's time to file, the state relies on your business's sales and tax data to determine how much of the tax you’ve collected should go to the state, as well as each county, city, or local jurisdiction. Compiling and reconciling all this information can be time-consuming and frustrating, which is why Shopify Tax now includes enhanced sales tax reports. Select the state and your filing frequency, and you’ll be taken to a jurisdictional breakdown of sales made and tax collected. Use this information to complete your online or physical returns, or export and provide to your tax and accounting team.

Explore the United States Sales Tax Report

Send in your returns!

You’ve done all the hard work; now file those returns! Most states recommend, and some even require that you file online. You can find more details by visiting each state’s website.

Consider automatically setting aside sales tax in the future

Tax time is stressful enough without having to worry about whether you set aside enough cash to pay taxes. To help save funds for tax filing time, you can set aside US sales tax from your Shopify Payments payouts and Shop Pay Installments payouts using Shopify Balance. Go to Balance and then turn on the sales tax account under Settings to get started. Once activated, the tax you’ve collected will be automatically allocated during your next Shopify Payments and Shop Pay Installments payout. You can withdraw funds from your dedicated sales tax Balance account at any time. This way, you'll have the necessary funds ready when it's time to file your taxes.

Take the stress out of sales tax

Shopify Tax strives to make sales tax management as seamless as possible. Take the first step towards a less stressful year with insights, hyper-accurate tax calculations, enhanced reports, and more!

Set up Shopify Tax

The following information is for educational purposes only. Consult with the state or a tax professional to verify that you’re filing and remitting correctly and on-time.

State

Annual Filing or semiannual

Quarterly Filing

Monthly Filing

Alabama

Jan. 20

Alaska (local tax)

N/A

Jan. 31

Jan. 20

Jan. 20

Jan. 31

Jan. 20

Jan. 31

Jan. 20

Jan. 20

Jan. 20

Jan. 20

Jan. 20

Jan. 20

Jan. 31

N/A

Jan. 20

Jan. 31

Jan. 25

Jan. 22

Jan. 20

Jan. 15

Jan. 20

Jan. 30

Feb. 28

Jan. 20

Minnesota

Feb. 5

Jan. 20

Jan. 20

Jan. 31

Jan. 20

Jan. 31

N/A

Jan. 20

New Mexico

Jan. 25

New York

Mar. 30

Jan. 20

North Carolina

N/A

Jan. 31

Jan. 20

Jan. 31

Jan. 23

Jan. 20

Jan. 20

Jan. 31

Jan. 20

Jan. 20

Jan. 20

Jan. 20

Jan. 20

Jan. 31

Jan. 25

N/A

Jan. 20

Washington

Apr. 15

Jan. 31

Jan. 25

West Virginia

Jan. 20

Wisconsin

Jan. 31

Wyoming

Jan. 31

Sales Tax FAQ

What is sales tax and how does it work?

Sales tax is a percentage-based charge added to the sale of taxable goods or services, collected by the seller at checkout and passed along to state and local tax authorities. Rates and taxability rules vary by state, county, and city, so the same product can carry a different tax amount depending on where it ships. Businesses act as the collection agent for the government rather than the party that ultimately absorbs the cost.

What is sales tax nexus, and when do I need to start collecting in a new state?

Sales tax nexus is the connection between a business and a U.S. state that creates a legal obligation to collect and remit sales tax. You establish an economic nexus when you exceed a state's threshold, typically $100,000 in annual sales to customers in that state or 200 transactions per year, regardless of physical presence. Physical activity like a warehouse, storefront, or remote employee can also create nexus, so it's worth reviewing sales by state as your business grows.

What happens if a business misses a sales tax filing deadline?

Missing a sales tax deadline typically results in interest charges and penalties added on top of the tax already owed. The consequences for not collecting sales tax can be steep, since past-due amounts must be paid out of pocket along with interest and penalties. Filing on time, or reaching out to the state's Department of Revenue about a payment plan, can help limit how much accrues on a late return.

Is sales tax the same as use tax?

Sales tax and use tax apply to the same transactions but are collected differently depending on who charges it. Sales tax is collected by the seller at the point of sale, while use tax is self-reported and paid by the buyer when a seller doesn't collect sales tax, such as on some out-of-state or online purchases. States created use tax to prevent buyers from avoiding tax simply by purchasing from a seller with no nexus in their state.

Do sales through online marketplaces still create tax obligations for my business?

Sales made through a marketplace can still factor into a business's tax obligations even when the marketplace itself handles collection. Whether a sale counts toward a nexus threshold can depend on whether the marketplace facilitator collects sales tax on the seller's behalf or not. Because rules differ by state, sellers using multiple channels should track marketplace and direct sales separately to confirm where filing is still required.

by David ToperPublished on 10 Jan 2024