Advance Payment
Monthly taxpayers who pay sales and use tax, including sales tax on services and meals, marijuana retail taxes, or room occupancy excise, and had more than $150,000 in total tax liability in the previous calendar year, were first required to make an advance payment as of April 2021.
The advance payment is a calculation of tax collected from either:
- the 1st through the 21st day of the month OR
- at least 80% of the prior month’s liability.
The advance payment must be paid by the 25th of the month.
For the 2022 returns for the tax types listed above, a new line will reflect the amount of tax previously paid for the period for all taxpayers. Tobacco retailers will continue to claim any prepaid tax on tobacco on a separate line, and that amount will not be reflected in the advance payment line. Please note, not all taxpayers who file these returns are required to make an advance payment, but all returns will now include this line item.
Below is a screenshot from the updated Sales and Use Tax return (ST-9) showing the new advance payment line. Line numbers will differ by return, but the information will be consistent.
Self-assessed Advance Payment Penalty
Taxpayers who are subject to the advance payment requirement and pay less than the full amount of the advance payment due by the 25th of the month, may be subject to a 5% penalty on the underpayment amount only.
The advance payment must be equal to the lesser of:
- Your actual tax liability through the 21st of the month or
- At least 80% of the prior month’s total liability.
The taxpayer will not be subject to the penalty if 70% or more of the total tax liability for the month is paid by the 25th day of the month.
A worksheet is available to help taxpayers determine if they have a balance due for the advance payment penalty and to help with the calculation.
Not all taxpayers will be subject to the advance payment penalty, but all returns will include a new line called Advance payment penalty for taxpayers who must report any penalty. Line numbers will differ by return, but the information will be consistent.
To learn more about the requirements and how to file, visit Advance Payment Requirements, which includes Advance Payment Frequently Asked Questions.
Sales and Use Tax on Telecommunications Services Return
The Sales Tax Services Return (Form STS) will have a new line item capturing the use tax due on purchases reported on this return.
Sales Tax on Meals Return
New lines will be added to the Sales Tax on Meals Return (Form ST-MAB-4) to capture information.
Taxpayers will be asked to break out cash versus credit sales when reporting gross sales on the Sales Tax on Meals return. Taxpayers are not required to break out alcohol sales. Since some taxpayers may need additional time to implement this change, DOR will allow taxpayers to estimate the amount of their cash sales versus credit sales until the close of the June 2022 period.
Additionally, you will need to indicate your Point of Sale (POS) system from a pull-down menu on the return. You must select a POS system to have your return processed. If your POS system is not included in the menu, you can choose “Not Listed POS System.” If you use a cash register, choose “Cash Register (manual system).” If you do not use a POS system or cash register, choose “None.”
Frequently Asked Questions on the cash versus credit line items on the Sales Tax on Meals Return
What should a vendor of meals include in the cash sales line?
A vendor of meals should include the amount of all gross sales of meals paid for with cash during the period. In addition, this line should include all sales that are paid for with anything other than what should be included in the credit sales line. For example, it should include sales paid for with a gift card or a SNAP benefits card. This line should also include sales of meals where the tax is collected by a third-party meal delivery service or other such service.
Gift card sales, third-party sales, and other such sales should be included in the cash sales line when used to pay for a meal regardless of how they were originally paid for. For example, a gift card purchased two years ago using a credit card, should still be included in the cash sales line when used to pay for the meal.
What should a vendor of meals include in the credit sales line?
A vendor of meals should include the amount of all gross sales of meals paid for with a debit or credit card during the period.
How should a split cash and credit transaction be reported?
A vendor of meals should include the amount of the meal paid for with cash in the cash line and the amount of the meal paid for with credit card in the credit sales line to the extent identified by their point-of-sale system, point-of-purchase, or cash register.
Similarly, where the transaction is split between a credit card and a gift card, or any other type of consideration that would be included in the cash sales line, the amount of the meal paid for with the gift card or other consideration should be included in the cash sales line and the amount paid for with credit card in the credit sales line.
DOR recognizes that some POS systems may not always identify the specific type of tender used for sales subject to the sales tax on meals on its monthly reports. To the extent the POS system clearly identifies the type of tender used, the vendor should report the actual amounts on the correct lines on the return. For example, a vendor that only sells meals should generally be able to report the actual amount of cash and credit used because all sales are subject to the sales tax on meals. However, where a portion of the tender is attributable to non-meals or a single transaction includes the sale of a meal and the sale of a non-meal, and the method of tender cannot be identified for some of the transactions, a taxpayer may use a reasonable method to determine the amount of their cash sales versus credit sales, so long as the same method is used consistently for each monthly return required to be filed. Taxpayers will need to provide DOR with records showing how the taxpayer arrived at the method used to report the cash sales versus credit sales in such cases.
Example 1. La Cloche is a restaurant that sells only meals. In July 2022 it has $500,000 in gross sales of meals. The POS system provides a breakdown of the tender that was used into three categories: credit, cash, and gift card. The POS system shows that La Cloche had $400,000 in credit sales, $50,000 in cash, and $50,000 in gift card. On its July 2022 meals tax return La Cloche will report $400,000 in credit sales and $100,000 in cash sales (gift card sales are included in cash).
Example 2. Sally’s Place is a restaurant that sells only meals. In July 2022 it has $550,000 in gross sales of meals. The POS system provides a breakdown of the tender that was used into four categories: credit, cash, gift card and mixed tender. The POS system shows that Sally’s Place had $400,000 in credit sales, $50,000 in cash, $50,000 in gift card, and $50,000 in mixed tender. The POS system does not identify what portion of the mixed tender transactions are cash versus credit. Of the transactions that can be identified $400,000 are credit and $100,000 are cash (4/5 credit and 1/5 cash). Sally’s Place can apply that ratio to report the breakdown of cash versus credit for the mixed tender transactions. (i.e., $40,000 in credit and $10,000 in cash). On its July 2022 meals tax return Sally’s Place will report $440,000 in credit sales and $110,000 in cash sales.
Example 3. The Flying Bird is a restaurant that predominantly sells meals, but also sells some merchandise. In July 2022 it has $200,000 in gross sales of meals and $1,000 in merchandise. The POS system does not provide a monthly breakdown of the tender that was used for the gross sales of meals separate from the merchandise sales. The POS system provides a breakdown of the tender that was used into three categories: credit, cash, and gift card. The POS system shows that The Flying Bird had $180,800 in credit sales, $10,100 in cash, and $10,100 in gift card. The Flying Bird can apply that ratio ($180,800: $20,200) to report the breakdown of cash versus credit on its July 2022 meals tax return (i.e., $180,000 in credit and $20,000 in cash).
Example 4. Lobster Pound is a market that sells fresh seafood but also sells lobster rolls and other prepared food subject to meals tax. In July 2022 it has $100,000 in gross sales from fresh seafood and $50,000 in gross sales of meals. The POS system does not provide a breakdown of the tender that was used for the gross sales of prepared meals separate from the sale of fresh seafood. The POS system shows that of the $150,000 in sales, $120,000 was paid in credit card, $20,000 was paid in cash and $10,000 in gift cards. Lobster Pound can apply that ratio ($120,000: $30,000) to report the breakdown of cash versus credit on its July 2022 meals tax return (i.e., $40,000 in credit and $10,000 in cash).
Example 5. Quick Mart is a convenience store that sells items subject to meals tax or sales tax and some exempt items. In August 2022 it has $140,000 in gross sales reported on its sales and use tax return, $50,000 in gross sales of meals and $10,000 in exempt sales not reported on a return. The POS system does not provide a monthly breakdown of the tender that was used for the gross sales of meals separate from the other sales. The POS system shows that of the $200,000 in sales, $150,000 was paid in credit card, $40,000 was paid in cash and $10,000 in gift cards. Quick Mart can apply that ratio ($150,000: $50,000) to report the breakdown of cash versus credit on its August 2022 meals tax return (i.e., $37,500 in credit and $12,500 in cash).
Example 6. Fast Fossil Group is an owner of 30 convenience stores and gas stations that sell items subject to meals tax or sales tax, gas and some exempt items. In August 2022 the group has $700,000 in gas sales, $500,000 in gross sales reported on its sales and use tax return, $200,000 in gross sales of meals and $100,000 in exempt sales not reported on a return. The combined POS system reports show that of the $1,500,000 in sales, $1,200,000 was paid in credit card, $200,000 was paid in cash and $100,000 in gift cards. Fast Fossil Group can apply that ratio ($1,200,000: $300,000) to report the breakdown of cash versus credit on all its August 2022 meals tax returns for each of the 30 locations, however, the total amount of cash and credit reported on each return must be equal to the gross sales of meals for each separate location.
What if there is a deposit on the account and it is not clear whether the amount was paid for in cash or credit?
If a deposit was previously paid and the vendor cannot determine whether it was paid with a credit card or cash at the time of the filing of the return for the period, the amount of the deposit should be reflected in the same manner as the final payment, whether cash or credit.
When will I have to begin reporting my gross cash sales or credit sales?
The new line items will be included on the Sales Tax on Meals return starting with periods beginning on or after January 1, 2022. The gross sales will have to be reported either as cash sales on line 1a or credit sales on line 1b. Line 1 will be the sum of the amounts reported on these two lines, which is equal to the total gross sales of meals for the tax period.
DOR recognizes that some taxpayers may require additional time to accurately report its cash sales versus credit sales based on the criteria described above. Therefore, DOR will allow taxpayers to estimate the amount of their cash sales versus credit sales until the close of the June 2022 period. The estimate of cash sales versus credit sales must be reasonable and the sum must equal the actual total gross sales of meals for the period. Starting with periods beginning on or after July 1, 2022, taxpayers will have to report their cash sales versus credit sales as explained on the FAQ above "How should a split cash and credit transaction be reported?".
Bulk Filing Sales Tax on Meals
Specifications for bulk filing sales tax on meals have been updated to include the changes on reporting cash versus credit sales and reporting on POS systems in the guide DOR Bulk File Instructions for Businesses.