Sales tax payment goes to your state revenue department, not the IRS, and the method depends on whether you're a business collecting it or a consumer paying it at checkout
If you're a consumer, you pay sales tax when you buy taxable goods — the cashier or website adds it to your total at the point of sale. You don't file a separate form or send money anywhere; the retailer collects it and sends it to the state.
If you're a business owner, you collect sales tax from customers, hold it in a separate account, and send it to your state's revenue department on a schedule they set. That schedule is usually monthly, quarterly, or annually depending on your sales volume and state rules. The state tells you the due date when you register for a sales tax permit.
A few states have no sales tax at all — Alaska, Delaware, Montana, New Hampshire, and Oregon — so residents and businesses in those states don't deal with sales tax payments. Every other state has its own rate, rules about what's taxable, and payment system.
Key Takeaways
- Consumers pay sales tax at the register or checkout; the retailer collects and remits it to the state on your behalf.
- Business owners must register for a sales tax permit with their state revenue department before collecting tax from customers.
- Most states require businesses to pay collected sales tax monthly, quarterly, or annually — your state's revenue department sets the schedule when you register.
- Payment methods vary by state but usually include online portals, mail, or electronic bank transfers; check your state's revenue website for the exact process.
- Failing to register, collect, or pay sales tax can result in penalties, interest, and personal liability for the business owner.
How consumers encounter sales tax at purchase
When you buy something in a store or online, the sales tax is calculated based on the item's price and your location. The retailer adds the tax to your bill before you pay. You don't have to do anything — the retailer handles the entire transaction and keeps track of what they collected.
Online purchases are more complicated because tax rules depend on where the buyer lives and where the seller is located. Some online retailers charge tax based on your shipping address; others may not charge tax at all if they don't have a physical presence in your state. This varies widely, so you may see different tax amounts from different sellers for the same item.
As a consumer, you generally don't file forms or send money for sales tax. The retailer's responsibility is to collect it correctly and pay it to the state. If a retailer fails to collect or pay sales tax, that's a problem between the retailer and the state — not your problem.
Registering as a business and getting a sales tax permit
If you own a business that sells taxable goods or services, you must register with your state's revenue department before you start collecting sales tax. The registration process varies by state but usually involves filling out a form with your business name, address, type of business, and expected monthly sales.
Some states combine sales tax registration with general business licensing; others have a separate sales tax permit system. Your state's revenue website will have the registration form and instructions. Many states now allow online registration, which is faster than mailing a paper form.
When you register, the state assigns you a sales tax permit number (sometimes called a resale certificate or seller's permit). You need this number to legally collect sales tax. The state also tells you your payment schedule — how often you must pay and when payments are due.
If you don't register and still collect sales tax from customers, you're breaking the law. If you collect tax but don't pay it to the state, you're liable for the full amount plus penalties and interest. Some states also hold business owners personally responsible if the business doesn't pay.
Payment schedules and due dates by state
Most states require sales tax payments on a monthly, quarterly, or annual schedule. Your state determines which schedule applies to you based on how much tax you collect. A business collecting $500 a month might pay quarterly, while one collecting $5,000 a month might pay monthly.
Monthly payments are usually due by the 20th of the following month — so January sales tax is due by February 20th. Quarterly payments are typically due one month after the quarter ends. Annual payments are due by a specific date set by your state, often January 31st for the previous year.
Your state's revenue department will send you a notice with your specific due dates when you register. Some states also provide a calendar on their website. Missing a due date triggers penalties and interest, which accrue quickly. If you're unsure of your schedule, contact your state's revenue department directly — they can confirm your dates.
Some states allow a small grace period (usually 5 to 10 days) before penalties kick in, but don't count on it. Pay on time to avoid extra charges.
How to submit your sales tax payment
Most states now offer online payment portals where you log in with your permit number, enter the amount of tax you collected, and submit payment. This is usually the fastest and most reliable method. The state's revenue website has a link to the portal and instructions for setting it up.
Some states also accept payments by mail — you write a check, include a payment voucher (which the state provides), and mail it to the address on the voucher. Mail payments take longer to process and are riskier because they can get lost. Use mail only if you can't access the online system.
A few states offer electronic bank transfer (ACH) or credit card payment options. These are faster than mail but may have processing fees. Check your state's revenue website to see which methods are available.
Before you pay, you need to know how much tax you collected during the period. Most businesses track this in their accounting software or point-of-sale system. The software calculates the total tax collected and generates a report you can use when you file your payment.
What happens if you miss a payment or pay late
If you miss a sales tax payment important date, your state charges a penalty — usually a percentage of the unpaid tax, often 5% to 10%. Interest also accrues on the unpaid amount, typically at a rate set by your state (often 5% to 8% per year). Both penalties and interest compound, so the longer you wait, the more you owe.
If you're significantly late or repeatedly miss payments, your state may revoke your sales tax permit, which means you can't legally collect tax from customers. The state may also file a lien against your business or personal assets, or pursue collection through the courts.
If you realize you're going to miss a important date, contact your state's revenue department when ready. Some states offer payment plans or temporary extensions if you communicate before the due date. Waiting until after the important date makes negotiation much harder.
Handling sales tax for different types of sales
Not all sales are taxable. Most states exempt groceries, prescription medications, and medical equipment. Some states exempt clothing or have different rates for different items. Your state's revenue department publishes a list of what's taxable and what's not.
If you sell both taxable and non-taxable items, you must track them separately. Your point-of-sale system should do this automatically, but you need to make sure it's set up correctly. Charging tax on non-taxable items means you owe that tax to the state even though you shouldn't have collected it.
If you sell to other businesses that will resell the items (wholesale), you usually don't collect sales tax — the end consumer pays tax when they buy the final product. The business buying from you should provide a resale certificate to prove they're reselling. Keep these certificates on file in case the state audits you.
Services are taxed differently depending on the state. Some states tax all services; others tax only specific ones like repairs or haircuts. Check your state's rules for the type of service you provide.
Frequently Asked Questions
Do I have to pay sales tax if I'm selling online?
Yes, if you're selling taxable items to customers in states where you have a physical presence or meet that state's sales tax threshold. Most states now require online sellers to collect and pay sales tax. The rules vary by state, so check with your state's revenue department about your specific situation.
What if I collected sales tax but didn't pay it to the state?
You owe the full amount of tax you collected, plus penalties and interest. The state may pursue you personally for the money, even if your business is closed or bankrupt. Contact your state's revenue department when ready to set up a payment plan if you can't pay in full.
Can I deduct sales tax I paid as a business expense?
No. Sales tax you collect from customers belongs to the state, not to you. You can't deduct it as a business expense because it was never your money. However, sales tax you pay on business purchases (like equipment or supplies) may be deductible depending on the item and your state's rules.
How do I know if my state has sales tax?
Five states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Every other state has some form of sales tax. Your state's revenue department website will show the current rate and what's taxable in your state.
What if I made a mistake on a sales tax payment?
Contact your state's revenue department and explain the error. If you overpaid, you can usually request a refund or credit toward future payments. If you underpaid, you'll owe the difference plus interest and possibly a penalty. It's better to report the error yourself than to wait for the state to find it during an audit.