Find Your State’s Sales Tax Discounts
Did you know that many states offer vendor discounts (also referred to as vendor compensation or allowance) for timely filing and payment of sales tax? These discounts represent a significant opportunity for small business owners to recover some of the costs associated with tax compliance, yet many merchants aren’t aware they exist!
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What Are Sales Tax Discounts?
Sales tax discounts (or vendor compensation) allow businesses to keep a small percentage of the sales tax they collect when they file and pay on time. Think of it as a “thank you” from the state for handling their tax collection duties efficiently.
In their original conception, these discounts were designed to compensate retailers for the time and effort spent collecting, accounting for, and remitting sales tax to state authorities. Today, with modern point-of-sale systems like those that integrate with DAVO, the process is much more streamlined, but the discounts remain available in many states.
State-by-State Sales Tax Discount Opportunities
Alabama Sales Tax Discount
Alabama offers a sales tax discount for businesses that pay their taxes early. If you file and pay your sales tax before the 20th of the month it’s due, you can reduce your payment by:
- 5% on the first $100 of tax due
- 2% on any tax amount over $100
Keep in mind, the total discount is capped at $400 per month.
Simplified Sellers Use Tax (SSUT)
Eligible out-of-state sellers can collect and remit a flat 8% sellers use tax under the SSUT program. Participants can receive a 2% discount on the first $400,000 of taxes collected and remitted, up to $8,000 per month. Discounts only apply to taxes reported and paid on time.
Alabama sales tax information >
Arizona Sales Tax Credit
Arizona provides an accounting credit for businesses that file their Transaction Privilege Tax (TPT) on time. The discount you receive depends on how you file:
- Paper filings: 1% credit, up to $10,000 annually
- Electronic filings: 1.2% credit, up to $12,000 annually
To qualify for the 1.2% rate, you must submit all TPT filings electronically for the entire year. The credit only applies to the state TPT and does not include local TPT.
Arizona sales tax information >
Arkansas Sales Tax Discount
In Arkansas, businesses can receive a 2% discount on local sales tax payments, helping businesses reduce their monthly tax burden.
- The discount is capped at $1,000 per month.
- It applies to local sales tax accounts only, with the $1,000 limit applying to each city and county reported.
- Unlike local sales tax, local use tax accounts are not eligible for this discount.
Arkansas sales tax information >
Colorado Sales Tax Discounts
Colorado allows businesses to retain a vendor fee for timely filing and payment of sales tax, helping offset the administrative costs of collecting and remitting tax:
- State portion: 4% of the tax collected, up to $1,000 per filing period (businesses with taxable sales over $1 million per filing period are not eligible)
- Local jurisdictions: Some may offer additional vendor discounts for timely electronic filing
Important update: Starting January 1, 2026, the state vendor fee will be eliminated. All collected sales tax must be remitted to the state, though some local jurisdictions may continue offering their own discounts.
These discounts are designed to compensate businesses for administrative effort and vary by location, so it’s important to stay informed about both state and local rules.
Colorado sales tax information >
Florida Sales Tax Discount
Florida offers a collection allowance for businesses that file and pay sales tax on time.
- The discount is 2.5% of the first $1,200 of sales tax due.
- The maximum allowance is $30 per filing period.
This allowance helps offset the administrative cost of collecting and remitting sales tax.
Florida sales tax information >
Georgia Sales Tax Discount
Georgia offers a vendor’s compensation incentive (a type of sales tax discount) for businesses that file and pay both state and local sales and use tax on time:
- You receive 3% compensation on the first $3,000 of tax collected.
- Any amount over $3,000 qualifies for a smaller 0.5% compensation.
Businesses required to file electronically will lose the compensation if they submit a paper return or payment, even if it’s on time. So be sure to use the electronic filing method if mandated.
Georgia sales tax information >
Illinois Sales Tax Discount
Illinois retailers receive a 1.75% discount on collected sales tax, capped at $1,000 per month.
Illinois sales tax information >
Indiana Sales Tax Allowance
Indiana provides a collection allowance for businesses that file and pay on time, allowing retailers to retain 0.83% of the sales tax due.
Indiana sales tax information >
Kansas Compensating Use Tax Discount
Kansas does not offer a standard vendor discount for in-state retailers that collect and remit sales tax. However, through reciprocal agreements with neighboring states, certain out-of-state retailers may qualify for a discount when remitting Kansas use tax:
- Missouri retailers: 2% of Kansas use tax remitted on time (reduced from 3% in 2015).
- Nebraska retailers: 2.5% of the first $3,000 of Kansas use tax remitted each month (reduced from 3% in 2015).
- Oklahoma retailers: 1% of Kansas use tax remitted on time, capped at $2,500 per month.
These discounts are designed to reimburse out-of-state businesses for the cost of collecting and remitting Kansas use tax.
Kansas sales tax information >
Kentucky Sales Vendor Compensation
Kentucky allows businesses to keep 1.75% of the first $1,000 and 1.5% of tax due in excess of $1,000 on each return, up to a maximum of $1,500. However, there’s a $50 cap per reporting period.
Kentucky sales tax information >
Louisiana Vendor Compensation
Louisiana offers vendor compensation for businesses that file and pay state sales tax on time.
- Through December 31, 2024: Retailers can deduct 1.05% of the state sales tax they collect, with a maximum of $1,500 per month.
- Beginning January 1, 2025: The compensation rate decreases to 0.84%, with a reduced monthly cap of $750 per dealer.
Keep in mind, vendor compensation does not apply to all state taxes, and Louisiana no longer provides discounts for local sales tax collections.
Louisiana sales tax information >
Maryland Sales Tax Discount
Maryland retailers receive a 1.2% discount on the first $6,000 of collected sales tax and 0.9% on the amount exceeding $6,000, with a maximum discount of $500 per return.
Maryland sales tax information >
Michigan Sales Tax Discounts
Michigan rewards businesses that file and pay sales tax on time with a small discount. Discounts apply only to two-thirds (0.6667) of the sales and use tax you collect at the 6% rate. The amount you can claim depends on your filing frequency and how early you make your payment.
Monthly filers
- If your tax due is less than $9, your discount equals two-thirds of the tax.
- If your tax due is between $9 and $1,200 and you pay by the 12th, you’ll get a $6 discount.
- If your tax due is between $9 and $1,800 and you pay by the 20th, you’ll get a $9 discount.
- If your tax due is over $1,200 and you pay by the 12th, your discount is calculated as: (tax × 0.6667 × 0.0075), capped at $20,000 per month.
- If your tax due is over $1,800 and you pay by the 20th, your discount is: (tax × 0.6667 × 0.005), capped at $15,000 per month.
Quarterly filers
- If your tax due is less than $27, your discount equals two-thirds of the tax.
- If your tax due is between $27 and $3,600 and you pay by the 12th, you’ll get an $18 discount.
- If your tax due is between $27 and $5,400 and you pay by the 20th, you’ll get a $27 discount.
- If your tax due is over $3,600 and you pay by the 12th, your discount is: (tax × 0.6667 × 0.0075), capped at $20,000 per quarter.
- If your tax due is over $5,400 and you pay by the 20th, your discount is: (tax × 0.6667 × 0.005), capped at $15,000 per quarter.
Accelerated filers
- If you pay by the 20th, your discount is (tax × 0.6667 × 0.005). There’s no maximum cap.
Paying early could help maximize your discount. Just remember that Michigan only applies the discount to two-thirds of your sales tax collected, not the full amount.
Michigan sales tax information >
Mississippi Sales Tax Discount
Mississippi retailers receive a 2% discount on their sales tax liability, limited to $50 per reporting period and $600 annually.
Mississippi sales tax information >
Missouri Sales Tax Allowance
Missouri grants a 2% timely payment allowance as long as your sales tax return is postmarked before the due date.
Missouri sales tax information >
Nebraska Sales Tax Discount
Nebraska provides retailers with a discount of 3% on the first $5,000 of sales tax collected each month. The monthly discount is capped at $150, which means the maximum you can claim annually is $1,800.
Nebraska sales tax information >
Nevada Sales Tax Discount
Nevada provides a modest 0.25% discount on tax due, which can still add up to meaningful savings over time.
Nevada sales tax information >
Make your sales tax less taxing with DAVO.
New York Sales Tax Collection Credit
In New York, businesses that file sales tax returns quarterly or annually may qualify for a vendor collection credit. This credit equals 5% of the taxes and fees reported, up to a maximum of $200 per return. However, businesses that are required to file monthly returns are not eligible for this credit.
New York sales tax information >
North Dakota Sales Tax Vendor Discount
If you hold a sales tax permit in North Dakota, you can keep 1.5% of the combined state sales, use, and gross receipts tax you collect. The maximum discount is $110 per month. For wholesalers, the same 1.5% discount applies, with a cap of $100 per month.
North Dakota sales tax information >
Ohio Sales Tax Discount
Ohio allows retailers to receive a 0.75% discount on the sales tax liability reported on their Universal Sales Tax return. Beginning January 1, 2026, however, this discount will be capped at $750 per return.
Pennsylvania Sales Tax Discount
Pennsylvania offers a basic vendor discount to businesses that file and pay sales, use, or hotel occupancy tax timely. The discount is the lesser of 1% of tax collected or a flat amount, depending on filing frequency.
- Monthly filers: $25 or 1% of tax collected
- Quarterly filers: $75 or 1% of tax collected
- Semi-annual filers: $150 or 1% of tax collected
These caps effectively limit the total annual discount to $300.
Pennsylvania sales tax information >
South Carolina Sales Tax Discount
South Carolina retailers receive a 3% discount if the tax due is under $100, and 2% if it’s $100 or more, with maximum annual discounts of $3,000 for paper filers, $3,100 for electronic filers, and $10,000 for voluntary out-of-state filers.
South Carolina sales tax information >
South Dakota Sales Tax Collection Allowance
South Dakota previously allowed a tax collection allowance for businesses that filed and paid electronically on time, equal to 1.5% of the tax due (capped at $70 per return period). However, this allowance is suspended from July 1, 2025, through June 30, 2028. During this suspension period, no vendor discount is available, even for electronic filers.
South Dakota sales tax information >
Tennessee Sales Tax Dealer’s Deduction
Tennessee offers a vendor’s compensation deduction to out-of-state businesses, not legally required to register, who file returns on time: 2% of the first $2,500 of state tax due, and 1.15% of the amount exceeding $2,500 per report.
Tennessee sales tax information >
Texas Sales Tax Discount
Texas retailers receive a 0.5% discount on sales tax, and monthly and quarterly filers may take an additional 1.25% discount on prepayments.
Utah Sales Tax Vendor Discount
Utah retailers filing monthly returns electronically receive a 1.31% discount on the total tax due; quarterly and annual filers are ineligible for this discount.
Virginia Sales Tax Dealer Discount
Effective July 1, 2025, Virginia updated its dealer discount for businesses that file and pay sales tax on time. Retailers may claim a discount equal to 6% of the first 3% of the state sales and use tax remitted. This new structure replaces the previous tiered system, simplifying the process for businesses. Note that the discount applies only to the state portion of the tax, not to any local or regional add-ons.
Virginia sales tax information >
Wisconsin Sales Tax Discount
Wisconsin provides a sales tax discount to businesses that file and pay on time. The allowance is structured as follows:
- $0–$10 in tax due: Discount equals the full tax amount
- $10–$1,333 in tax due: Flat $10 discount
- Over $1,333 in tax due: 0.75% of the tax due, capped at $8,000
Wisconsin sales tax information >
Wyoming Sales Tax Compensation Credit
Wyoming offers a vendor compensation credit for businesses that file and pay sales tax early on or before the 15th of the month. The credit applies as follows: 1.95% on the first $6,250 of tax due, and 1% on any amount over $6,250, with a maximum credit of $500 per month. Both timely filing and payment (not just electronic filing) are required for eligibility.
Wyoming sales tax information >
Why These Sales Tax Discounts Matter for Your Business
Sales tax discounts represent free money for your business, revenue you’re entitled to but may be missing out on if you’re unaware these programs exist, not filing your sales tax returns on time, or making errors in your sales tax filings. Every missed deadline or inaccurate submission directly impacts your bottom line in two ways: you lose the discount you’re entitled to and potentially face costly penalties.
For busy restaurant owners, retailers, and service providers, keeping track of varying sales tax requirements across different jurisdictions can be overwhelming. Missing filing deadlines means not only losing out on these discounts but also potentially facing penalties and interest as well.
How DAVO Helps Maximize Your Sales Tax Discount
This is where Solución automatizada de impuestos sobre las ventas de DAVO becomes particularly valuable. When you use DAVO:
- Your sales tax is automatically collected daily and set aside
- Returns are filed accurately and on time, every time, garantizado,
- You never miss out on available vendor discounts or compensation
- The entire process runs in the background without your manual intervention
By ensuring timely and accurate filing, DAVO helps you claim every sales tax discount you’re entitled to receive, putting money back into your business with zero additional effort.
Ready to claim the sales tax vendor compensation you deserve? Contacte con DAVO hoy to learn how our automated sales tax solution can help your business maximize returns while minimizing effort.
