What is annual reconciliation?

Annual reconciliation in USA sales tax refers to the process of reviewing and verifying your business's sales tax records and filings for the entire year. This process involves comparing the total sales tax collected throughout the year with the amount remitted to the state or local tax authority.

Key Steps in Annual Reconciliation

• Gather Records: Collect all relevant sales tax records, including:

  • Sales records

  • Tax collected

  • Remittance records

  • Tax returns

  • Exemptions and credits

• Verify Accuracy: Check the accuracy of your sales tax calculations and ensure that all sales have been properly classified as taxable or exempt.

• Reconcile Amounts: Compare the total sales tax collected throughout the year with the amount remitted to the tax authority. Any discrepancies should be investigated and corrected.

• Review Exemptions: Ensure that all tax-exempt sales were properly documented and reported.

• Calculate and Pay Any Remaining Taxes: If you owe any additional sales tax, calculate the amount and submit payment to the tax authority.

• Prepare and File Annual Return: Complete and file your annual sales tax return, which summarizes your sales, tax collected, and remittances for the year.

States Requiring Annual Reconciliation

Annual reconciliation simply means a reconciliation of sales, tax collected and remitted - you can understand it as a tax summary of the whole year, submitted in addition to your normal filings. As of the last update to this article, these are the states that commonly require annual reconciliation or reporting for sales and use tax:

• Hawaii

• Michigan

• Rhode Island

Additional considerations: 

• Local Jurisdictions: Some local jurisdictions within states may have additional requirements or reporting deadlines.

• Specific Business Types: Certain types of businesses, such as retailers, wholesalers, or manufacturers, may have specific reconciliation requirements.

It’s important to note this article is not exhaustive and specific requirements can vary. To ensure compliance, you can reach out to your Taxually customer care for additional information!

FAQ

How do I request annual reconciliation(s) to be filed on my behalf? 

If you’re needing to file annual reconciliation(s), reach out to our team regarding the state you’re needing to file. Additional fees may apply for this service.