Sales tax glossary
What do back taxes mean for sellers?
Back taxes are taxes that should have been paid in earlier periods but weren't, whether through error, oversight or unfiled returns. For sales tax, they often arise when a business had nexus in a state without registering, and they usually come with interest and penalties.
Full guide: What are back taxes?
Example
A seller finds out it passed a state's nexus threshold two years ago. It owes the tax it should have collected on those sales, even though it never charged its customers.
Why it matters for sellers
Uncollected sales tax usually comes out of your own margin, because you can't go back and bill past customers. Dealing with it early, often through a voluntary disclosure agreement, limits the cost.
Related terms
This definition is general information, not tax or legal advice. Rules vary by jurisdiction and change over time.
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