How COVID-19 Will Change Sales Tax Obligations and Payroll?

As the world grapples with the effects of Covid-19 and a vaccine is still months away, businesses and employees all over the world are living in uncertain times. Even governments have announced certain relaxations and delays in tax filings.

These relaxations and extensions are expected to support businesses and individuals to fare better through these difficult financial times created by this pandemic. In March, the Treasury Department and the IRS announced an extension of tax returns filing deadline from April 15 to July 15 this year. The IRS urged all taxpayers who were owed a refund to file at the earliest. Besides, the agency also laid down provisions for those individuals who couldn’t file by July 15. If you are an individual taxpayer who cannot file your return by the 15th of July this year, you could request the agency for an extension.

Sales Tax & State Announcements

Some states have made certain announcements or they have made indications that they will be following the federal revenue agency. A couple of examples of states that have announced an extension in sales tax filing are as follows:

California

The Golden State passed an executive order to push the state tax filing date by 60 days for both businesses and individuals who cannot on time. The California Department of Tax and Fee Administration (CDTFA) made other easier provisions too:

• The agency announced a monthly payment plan for businesses that generated up to $5 million in revenue
• The state allowed some taxpayers to repay in 12 installments
• The California Franchise Tax Board can waive any late filing, payment penalties, and interest for up to $50,000 of sales and use tax liability only.

 District of Columbia

The DC Office of Tax and Revenue has announced that it will waive off any late payment penalties and interest against sales tax and use tax for periods ending February 29 and March 31, 2020. The sales tax for these periods can be paid by July 20.

Many other states have made similar announcements for sales tax filing dates.

Payroll Tax Filing Extensions

Similarly, many states have announced an extension in the last date for filing payroll reports and paying payroll taxes. For example, the California Economic Development Department has allowed employers to apply for an extension of 60 days with the department.

Even the federal government’s CARES Act has made some provisions in this area. The act allows employers to delay paying their part of the 2020 Social Security payroll taxes up to the end of 2022. Employers are allowed to must pay a minimum of 50% until the end of 2021 and the rest by the end of 2022. The act further allows employers to delay the payment of the Railroad Retirement Taxes.

This deferral is available to all types of employers, including those whose business has not been affected by Coronavirus. However, small businesses that have received a loan under the SBA’s Paycheck Protection Program will not be eligible. The loans that cover payroll costs are forgivable. Payroll costs also include payroll taxes.

Thus, the pandemic has brought about noticeable changes to sales tax and payroll tax obligations. Many states have announced extensions in tax returns filing and payment dates to provide the much-needed respite to both businesses and individuals.

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