Sales Tax Filing vs. Annual Tax Filing

What is Sales Tax Filing?

It’s a state-level tax, based on your sales.
This is not an income tax. It’s a transaction-based tax on the products/services you sell to customers.

Key points

• Filed with the state Department of Revenue (state specific), not the IRS.

• You purchase goods for resale tax free
• You collect sales tax from customers → you remit it to the state.

• Filing frequency can be monthly, quarterly, or yearly.

• Applies mostly to e-commerce sellers, retail, and certain service providers.

Example: If you sell products in Texas and charge 8.25% sales tax, you must remit that tax to Texas on your filing schedule.

What is Annual Tax Filing?

It’s a Federal/State Income Tax, once per year. This is your business’s income tax return.

Key points

• Filed with the IRS
  
  
• Based on your profits, not your sales.
  
  
• Required once per year, regardless of business activity.
  
  

Sales Tax Filing vs Annual Tax Filing – What’s the Difference?

• What they tax:
  
  
  • Sales Tax Filing: Tax on transactions (what you charge customers at checkout).
    
    
  • Annual Tax Filing: Tax on profits (income minus expenses).
    
    
• Who you file with:
  
  
  • Sales Tax Filing: Filed with state revenue agencies.
    
    
  • Annual Tax Filing: Filed with the IRS 
    
    
• • Sales Tax Filing: Multiple times a year (monthly/quarterly/annually depending on the state).
    
    
  • Annual Tax Filing: Once per year.
    How often you file:
    
    

Simple way to remember:

You collect sales tax for the state → you pass it through to the state.
You earn profit → you report it on your annual income tax return.