Due to the corona pandemic and the exit restrictions, more people are ordering goods online. People often order a selection of goods and return them if they do not like them. In the USA alone, a very large number of goods were returned in 2021, so that the percentage of returns was 16.6%, which is 6% higher than in the previous year. The e-commerce business therefore necessarily has to deal with returns, but this raises the question of sales tax and the sales tax refund obligation comes into effect.
How is Sales Tax handled on a return?
If an order is now returned, the customer must be refunded the sales tax that a company previously raised. However, this means that a company must submit an adjusted sales tax return. In this declaration, companies must claim the refunded sales tax so that the state can use this amount as a credit for future sales tax payments.
The reason why it is tremendously important that companies make an adjustment to the tax return is because of the dynamic change in the amount of sales tax. For example, the sales tax may increase by 1% between the time of purchase and the time of return, incorrectly crediting the company with 1% more sales tax. This becomes especially problematic if the company is a large one, as the amount then starts to add up.
Submission of a Tax Return
How to file and amend the tax return now?
In most states, businesses can easily register with the state’s tax department and adjust the existing return online in the portal. However, some states still want physical documents, so the tax return must be modified and filed in paper form. Please find out what the regulations are in your state.
It is also particularly important that you keep proper documentation of your sales tax, as this will not lead to unnecessary problems in the case of an audit.
Are you now looking for a contact person for digitization and tax matters?
Since one year INPOSIA is part of the American tax company Avalara. Together with Avalara, we form a duo of experts around digitization and can offer your company even more comprehensive advice. Feel free to contact us for tax and digitization questions and arrange a consultation!
You would like to digitize? Contact us now!
We are happy to be there for you – by phone, by e-mail, or personally at your site!