A new law requires those who are currently required to file June accelerated payments of sales and use tax must also pay a portion of each month’s tax liability early, beginning September 2010. If your company’s sales and use tax liability for the fiscal year ended June 30, 2009 is $120,000 or more you are required to follow the new rules for making payments early.
One of two payment methods must be used for those affected by the accelerated payment requirement and the method selected must be used for all future payments.
Method 1: Under Method #1, the majority of the sales tax (90%) must be paid 6 days early. On or before the 14th day of the month following the month the taxes are collected, a vendor must remit 90% of the estimated liability for the prior month. The due date of the sales and use tax return continues to be the 20th of the month, which has not changed. The balance of the taxes due must be paid on or before the due date.
Method 2: Under Method #2, a prepayment of 67% the current month sales tax is due, along with the full payment of the prior month’s liability. On or before the 20th day of the month following the month the taxes are collected, a vendor must file and pay their sales tax, as usual AND also remit 67% of the liability for the month as a prepayment for the current month. For example, under this Method, on 9/20/10, the August return and payment are due along with 67% of September’s sales tax. If your August sales tax liability was $100, you would pay in $167, which is $100 for August and $67 as the September prepayment.
If you do not meet the payment deadline of September 14, 2010 for Method #1, you are required to use Method #2.
There is a 10% penalty for underpayment and the requirement for making early payments continues until the state’s cash flow account and the budget reserve account reach the amounts set by statute. The Minnesota Department of Revenue will notify you when this happens.
