When DOR administers a tax rate change, cash-basis retailers should report any unpaid customer billings during the last filing period before the tax rate change date. This is the easiest and most efficient way cash-basis retailers can transition from one tax rate to another.
Sales tax rate changes can take effect on the following dates:
- You are a cash-basis business that reports on a quarterly basis.
- You enter a contract to sell a customer 100 widgets on March 30, 2017 for $1,000.
- Tax rates will change in the customer’s geographical area on April 1, 2017 from 8.9 percent to 9.1 percent.
- Your widget delivery is scheduled for April 2, 2017.
You need to include the $1,000 as income on your Quarter 1/2017 excise tax return under the retailing and retail sales tax classifications. (This is your most recent tax return, covering the tax period before the tax rate change date). This way, the sale is taxed at 8.9 percent when we process the tax return.
If you waited to report these sales in Quarter 2 when you actually collected the money from your customers, the sales you reported during this period would be taxed at 9.1 percent (even if you collected tax at the 8.9 percent rate).
If you are not able to collect some of the amounts reported this way (in Quarter 1), you would be allowed to claim a credit or refund for the tax reporting period when the unpaid customer billings are written off as uncollectible.