Sale Tax fee?

So I registered my business in July, and got a tax id number, thought I did everything right, I only had 2 paying clients since, I have been doing all free session since forever to build my portfolio, basically giving it all away. I just found out I got a letter from the state and I own $555 in sales tax? What? I haven't even made that much yet. How do they get this number, do states usually have a minimum tax fee?

Is that perhaps an estimate they sent?

Typically small businesses like ours file twice/year. In Ohio the tax reporting periods for this year so far have been 1/1/2015 through 6/30/2015 (taxes due 7/23/15 if my memory is correct) and the next/current period is 7/1/2015 through 12/31/2015 with the bill due about 3 weeks after that.

In my county where the rate is 8% I would have had to make gross sales of over $6900 to generate $555 in sales tax. I am not aware of a minimum tax fee.

I have never heard of a minimum sales tax fee.

First question is did you file your quarterly or semi-annual sales tax statement and payment? If not and it is past due, this might be a penalty for late filing.

I thought I only had to file yearly. Which considering I am a newbie is what I thought

I signed up to get the business stuff out the way and didn't think about it since. I just got my first paying client last month.

They are just making you pay your first payment up front. What they billed you for was the expected tax you may collect for the next period (probably one year.) After you establish a record of how much you regularly collect, the amount will more reflect the actual tax you owe.

Nogo wrote in post #17768562
They are just making you pay your first payment up front. What they billed you for was the expected tax you may collect for the next period (probably one year.) After you establish a record of how much you regularly collect, the amount will more reflect the actual tax you owe.

That's interesting - it's been a few decades since my first filing and maybe things have changed, but I NEVER had to make any upfront estimated payments. How would Indiana know in advance what he was going to make? This means he would be carrying a credit. That's news to me.

OneDeep wrote in post #17768560
I signed up to get the business stuff out the way and didn't think about it since. I just got my first paying client last month.

Just to make sure, when you say you signed up in July, you meant July of THIS year?

sapearl wrote in post #17768574
Just to make sure, when you say you signed up in July, you meant July of THIS year?

Yes this year. I wanted to do it on the first of a month so July 1st.

I will call the number I got tomorrow, just hope they can give me a good reason

sapearl wrote in post #17768573
That's interesting - it's been a few decades since my first filing and maybe things have changed, but I NEVER had to make any upfront estimated payments. How would Indiana know in advance what he was going to make? This means he would be carrying a credit. That's news to me.

Sales taxes are regulated by the individual states. Every state is different. Your state may be different. I just know my state does that for home based businesses. It is also different for businesses that have a retail front.

Are they maybe saying you owe tax on equipment you bought for the business?
In Washington State (where I ran a business for 40 years) all sales tax collected was paid either the following month or the following quarter, depending on how much your gross revenue was.

Nogo wrote in post #17768590
Sales taxes are regulated by the individual states. Every state is different. Your state may be different. I just know my state does that for home based businesses. It is also different for businesses that have a retail front.

Ok, I can understand that.

So out of curiosity, in your state how do they determine in advance what you will make? Do you provide an estimate and then if you pay them too much in advance you run a credit for a while?

I checked Indiana's (that appears to be where the OP is from) department of revenue site, it doesn't say anything about estimating revenue for prepaying sales tax. It would be interesting to see the letter from the state.

In my state you pay taxes on actual sales, not on anticipated or estimated sales. I guess governments can pass any laws they want, but charging sales tax far in excess of any sales made or contemplated seems pretty abusive.

It says:

IMMEDIATE ACTION REQUIRED: A review of your Indiana sales tax for the tax period July 31, 2015 shows you may own $555.18 including penalty and interest. YOU MUST TAKE ACTION IMMEDIATELY TO RESOLVE THIS TAX DEBT. You must pay the amount owned no later than January 4, 2016, or you may protest this tax assessment within 60 days (by the due date listed here and below). If you fail to do either, this tax debt will continue to accrue interest and could ultimately convert into a tax warrant for collection action.

the back of the paper says

YOU HAVE FAILED TO SUBMIT THE APPROPRIATE TAX FORM AND THEREFORE THIS NOTICE IS AN ESTIMATED AMOUNT DUE BASED UPON THE BEST INFORMATION AVAILABLE. IF YOU DO NOT OWE THIS FOR ANY OF THE REASONS LISTED, YOU MUST SUBMIT ONE OF THE FOLLOWING IN ORDER TO CLEAR THIS.

1. A COPY OF THE TAX RETURN AND THE FRONT AND BACK OF YOUR CANCELLED CHECK, IF PAID.
2. IF THERE WAS NO ACTIVITY THAT OCCURRED WITH YOUR BUSINESS, YOU ARE STILL REQUIRED TO FILE TAX RETURNS FOR THE PERIODS INDICATED
3. IF THE BUSINESS WAS CLOSED, THE RESPONSIBLE OFFICER OF THE CORPORATION, PARTNER, OR SOLE PROPRIETORSHIP MUST SUBMIT A COMPLETED INDIANA FORM BC-100.