It’s been quite the year as many businesses and lives have been put on hold. But one thing that hasn’t stopped is the need to collect and remit sales tax. Even in the midst of a pandemic, sales tax updates have continued to happen. In this blog, we will take a look at some of the major sales tax developments that have happened so far in 2020.
Marketplace Facilitator Laws: Most states with economic nexus laws also employ marketplace facilitator laws. This year, Georgia, Hawaii, Texas, Louisiana, Wisconsin, Illinois, Iowa, and North Carolina added such laws, which for online sellers mean that a facilitator will handle collecting and remitting sales taxes on behalf of sellers in most states. Contrarily, Louisiana’s Supreme Court this year found Walmart free of obligation to collect and remit sales tax for its third-party sellers.
Alaska Economic Nexus: While the state of Alaska does not have a sales tax, certain local jurisdictions in the state do. The collection and remittance obligation at the local level follows a physical presence at the local level. Now these local jurisdictions are leveraging economic nexus to force retailers to collect and remit sales tax. Alaska and its Alaska Remote Seller Sales Tax Commission continue to work toward a streamlined, single-level administration of sales tax collection and remittance at the local level. Dozens of local jurisdictions (with sales taxes in place) are expected to join by the end of the year to equalize sales between physical and remote sellers.
Taxability of Digital Products: Tax on digital products has remained a hot-button topic in the US and overseas. The U.K. has started taxing social media and search engines this year, and Poland began taxing streaming media this summer. This summer, the U.S. Trade Representative’s office also said it was opening investigations into digital tax measures in many overseas countries. Other nations’ taxing of such household tech names as Google, Facebook and Amazon still remains a disjointed effort. Domestically, the push to tax digital goods and services varies from state to state, as you would expect. Stay tuned as more state legislatures tax this growing industry segment.
Deferments from the Pandemic: Many states offered relief for sales tax filing obligations with the delayed federal tax-filing deadline of July 15. This relief, largely now over, created in some businesses the mistaken notion that they’d never have to remit sales taxes they’d collected – clearly a bad idea. Many of which were left scrambling to pay back the sales tax collected when the pandemic was clearly not over.
Home Could Be Where the Tax Obligation Is. This pandemic has prompted shelter-in-place orders nationwide, meaning legions of employees have been working from home to contain COVID-19. Some workers also chose to work in second homes or elsewhere for a multitude of reasons. Either way, the result is more workers in locales longer than anyone intended when the year began. Physical nexus includes employees working from home in tax jurisdictions different from office locations.
Will ongoing widespread work-at-home policies create physical nexus, igniting new tax obligations and potential liabilities down the road? That’s a growing question through this year, as states that initially went easy during lockdowns have started to assert that telecommuting employees in a different state could give a company nexus.
As sales tax continues to evolve, it makes the burden to keep up with it even more difficult. Be sure to watch your nexus footprint, as well as the taxability of your products/services as rules and regulations change. One wrong misstep with sales & use tax could lead to unwanted fees and liability for you and your business.
If you think your business may be impacted by this year's sales tax developments, contact TaxConnex. We take sales tax off your plate and manage it completely. Now, it's all on us.