Businesses pay sales tax to their state and local municipalities on sales they make to consumers. Different states have requirements regarding the collection and remittance of sales tax, usually based on the state tax code and number of cities and counties allowed to collect sales tax. Most states require taxpayers to remit sales tax on a monthly basis. If a company overpays the amount of sales tax due to the state, the company must follow specific guidelines for reclaiming the overpaid amount.
While each state has specific rules for reclaiming overpaid sales tax amounts, business must follow a few basic procedures. Businesses are required to record each sales and the appropriate sales tax amount owed to the state revenue board. Each month, companies fill out a tax form, eitherelectronic or paper, listing the gross sales, tax-exempt sales, tax liability and any prepayments made to the state for previous sales tax filings.
For a business to reclaim overpaid sales tax, they may need to contact the revenue board indicating the time period for which month included extra sales tax. The company may then need to file an amended tax return, indicating where the errors occurred during the original filing period. This return is filed once completed; it does not need to be filed at a certain time during the month.
State revenue boards using an electronic method of collecting sales tax do not use this method for repaying overpaid sales tax. Companies must contact the revenue board or file a paper return indicating the overpaid amount, requesting a refund from the revenue board.
Companies that declare an overpayment of sales tax are usually required to send a statement to the state revenue board indicating that customers have been refunded the over collected sales tax amounts. Revenue boards use this procedure to prevent possible sales tax fraud by businesses.
If the state revenue board has recalculated the company's sales tax return and discovered an error, it may send a letter to the company regarding the situation. In this case, the revenue board usually allows the company to reduce current sales tax liability by the overpaid amount. This is essentially a vendor credit issued by the tax board.
