When you want to adjust your sales tax on a previously filed return, you need to file an amendment for sales/use tax return. It is important to note that amendment of sales/use tax return varies by state and local jurisdiction.
Currently, QBO does not support amended sales/use tax reporting but, this functionality is in the product enhancement queue. In the meantime, it is always best practice to first consult with the relevant US tax agency to obtain current and clear guidance on amending a sales/use tax return in your jurisdiction.
The process for filing an amended return may differ for each Tax Agency and may depend on whether the amendment is for more tax, less tax, or for another change, but the tax amount reported stays the same. Keep in mind that when amending a return where more tax is due, a jurisdiction will often assess penalties and interest on the basis that the corrected amount was not timely reported and paid. Many states imposes penalties, but, also provide a penalty waiver process.
To increase tax liability
When a taxpayer wants to adjust a previously filed return to report more tax, the jurisdiction where the additional tax is reported will assess penalties and interest on the added tax amount. However, the same jurisdiction typically provides a process for requesting a penalty waiver. In contrast, interest is generally never waived or abated. Otherwise, the overall process for amending for more tax is usually less cumbersome than amending for a refund, because all that is generally needed is the amended return and related payment.
To decrease tax liability
A taxpayer might want to adjust previously filed returns to report less tax when there are changes to the sales transactions data already reported, often due to:
- Product returns
- Order cancellations
- Price drops
- Receipt of exemption certificates or miscellaneous errors
When a Tax Agency is requested to refund monies or issue a credit, they typically make the related amendment process a bit more burdensome. Usually the taxpayer must gather and provide copies of documents supporting the refund claim or credit, including:
- Original and updated/revised invoices
- Credit memos
- Proof tax refunded to, or never received from customer
- Exemption certificates (if relevant)
- General ledger sales data (sometimes)
Additionally, Tax Agencies may require that their own specific refund form accompany the amended return and supporting documents.
Similar to amending a return to report more tax, the process for amending a return for a refund or credit varies by tax jurisdiction. Even after amending as instructed, tax agents often request more detail and the agency itself may take an extended time to process the adjusted filing, but once approved, most jurisdiction will issue a formal refund letter or credit memorandum.