Most people who call the United States home are familiar with sales tax. It’s that little bit more you pay on Amazon and the extra of the end of your grocery bill. However, sales tax can sometimes fly under the radar by donning another title. In this article, we’re going through the alternate names of sales tax, why states use different terminology, and how these unique labels and reporting periods result in confusion for businesses and consumers.
Sales Tax by Any Other Name
While “sales tax” is the most common term, some states use alternate names. These include gross receipts tax, excise tax, and use tax. Despite these different titles, they generally refer to the same concept – consumption taxes on the sale or use of tangible goods and some services. Unsurprisingly, this can cause a lot of confusion for businesses and consumers.
For example, Hawaii uses the term “general excise tax” , but it functions similarly to traditional sales tax. Washington refers to its main source of tax revenue as “retail sales tax”, while also imposing add-ons like Business & Occupation tax (B&O) and Litter tax. Some states levy “use tax” on consumers who purchased taxable items without initially paying sales tax, while Alabama reserves a Seller’s Use Tax for out-of-state or remote retailers.
Regardless of the name, the intent is generally the same – to tax retail transactions on goods and services.
Why Different Names for the Same Tax?
The various names used for sales tax trace back to how it is governed. The United States operates under a federal system of government, which divides political power between national and state governments. This dual nature allows each state a certain degree of autonomy to create and enforce its laws and regulations. With sales tax, each state has full independence in establishing its own sales tax rules as long as they stay in compliance with constitutional rights.
This lack of national oversight offers states the abiity to establish, manage, and name sales tax on their terms. Over time, this freedom has resulted in individual states developing unique tax systems that can differ significantly.
With so many varying names, we’ve done the hard work for you. Take a look at the table below for a breakdown of which states have different sales tax monikers and how they’re different.
|Sales Tax Designations
|Alabama does have a standard “sales tax”, but only for businesses that are located in the state. Remote businesses register for and remit Seller’s Use Tax (SUT), or Simplified Seller’s Use Tax (SSUT) if they want to collect and remit at a flat 8% rate.
|Arizona calls its sales tax Transaction Privilege Tax (TPT), which simply means that they tax vendors for the privilege of doing business in the state. This type of tax is still paid by the consumer, collected by the business, and remitted back to Arizona the way sales tax is.
|Hawaii implements General Excise Tax (GET), which is charged based on a business’s gross income. Companies selling to Hawaii have the option to charge their customers GET like they would sales tax, but it is not required by law.
|To add distinction, Missouri imposes sales tax on Missouri-based businesses, but remote sellers who meet economic nexus thresholds collect and remit vendor’s use tax. This can create confusion since use tax is typically paid and remitted by the purchaser in other states.
|New Mexico’s version of sales tax is based on gross revenue for a period. This is called Gross Receipts Tax (GRT). What makes this a form of sales tax is that it is still collected from customers based on their location, before being remitted back to the state.
|Businesses that are categorized as “vendors”, which includes selling retail products, granting admissions, and providing taxable services, collect and remit Wyoming excise tax. This tax operates the same as sales tax, just under a different name.
What about Reporting Periods?
Sales tax reporting periods (also referred to as filing frequencies) refer to how long a business collects sales tax before remitting it back to the state.
|Not many states have an early monthly reporting option, but others, like Indiana, require businesses with high sales volume to file earlier in the month that the rest. This reporting period is the same as monthly in that it covers the sales and tax collected in the previous month.
|Monthly filing is a little more straightforward. Businesses with a monthly filing frequency submit sales tax reports and payments each month, covering the sales tax they collected in the previous month.
|States like California may have a period between monthly and quarterly called monthly prepay. This frequency is attached to quarterly, in that a return isn’t filed until the quarter is up but the business will need to pay a percentage of the sales tax they collect before filing.
|Quarterly filers will submit a return once every three months. These return cover the previous three-month period. For example, Jan-March sales are filed in April, April-June sales are filed in July, and so on.
|Semi-annual is another less common frequency, but some states like Ohio and Maryland still use this reporting period for smaller businesses. Semi-annual reports cover the past six months, and are typically filed in July and January.
|Annual is what it sounds like: a once-a-year reporting frequency. Typically reserved for businesses with low sales volumes, annual filing covers the previous 12 months and is usually due in January.
States set thresholds based on sales volume, revenue, or other factors to determine whch businesses must follow which filing frequency. But are these periods the same in each state?
Fiscal Year Filings
Sales tax due dates and structures vary from state-to-state, but the majority follow the calendar year (January-December). Still, there are others that use the fiscal year to determine their annual returns.
Doing business in sunny California? You’ll find that the annual period and due date looks a little different from other sales tax obligations. In California, the fiscal year runs from July of the previous year to June of the current year. For instance, an annual sales tax return for the fiscal year of 2021 would cover the sales you made from July 1, 2021 to June 30, 2022.
These returns are due in July, right after the period has fully closed.
The Windy City has its own unique set of sales tax requirements in addition to the standard Illinois sales tax. Certain business activities require companies to register not only for an Illinois sales tax permit, but a City of Chicago license. This means dealing with two different sales tax return filings to ensure compliance with local and state laws.
Just like California, sales tax returns in Chicago follow the fiscal year calendar, running from July to June. However, the deadline is different. Annual sales tax returns for Chicago are due in August, which gives you a bit more time compared to the California due date.
New York Quarters and Annuals
The Empire State, often seen as an icon of innovation and trend-setting, unsurprisingly has its own approach to sales tax. Its unique quarterly and annual filing periods can be puzzling as they don’t follow a calendar or fiscal structure.
The reporting periods for New York’s quarterly sales tax returns are:
- 1st Quarter: March 1 – May 31
- 2nd Quarter: June 1 – August 31
- 3rd Quarter: September 1 – November 30
- 4th Quarter: December 1 – February 28/29
The state’s annual returns extend from March 1 of the previous year to the last day of February in the current year, and are due March of the current year.
The Confusing Result
Without an advanced understanding of how sales tax is coined and periodized in each state, it is easy for some obligations to slip through the cracks. Unfortunately, this can result in some hefty consequences, from penalties to fines and more. But with the sales tax complicatons that come with the digital age, there are solutions! Here at SalesTaxSolutions.US, we offer a myriad of sales tax services for hundreds of businesses across the globe. From nexus review to sales tax filings, registrations to audit assistance, we do it all. Contact us today for a free 15 or 30 minute consultation with Founder-in-Chief Christopher Stout, and let us handle the complications of sales tax for you.