Your COVID-19 Questions: Answered

The constantly changing nature of COVID-19 has left people with a lot of uncertainty. Sales tax isn’t an exception to that uncertainty as over 20 states have announced changes to their sales tax deadlines or policies in order to help businesses as they navigate life during the pandemic. If you’re like many businesses, you have sales tax nexus in multiple states. Keeping up with all their different regulations was difficult enough before COVID-19, and now it’s more complicated than ever.

At TaxConnex, our goal is to take sales tax off your plate. Now it is even more important to have a resource to help you understand your sales tax obligations. We aim to help not only our clients through this time, but you as well, even if it is only to serve as a resource to stay up to date with all the changes.We asked you to submit your questions about sales tax and COVID-19 and our experts have given their answers. If your question wasn’t answered, or you have an additional question not covered here, please reach out.

What changes or extensions for sales & use taxes have been granted?

Please refer to our web page for relief offered by certain states.

I'm currently under a sales tax audit. With operations slowing due to the global impact of COVID-19, would the states be willing to assist us in waiving interest/penalties or adjust extrapolation %. Have you seen the states working with audited taxpayers?

The audit programs of all states have slowed and are in suspension in some cases.  The states seem willing to work with taxpayers in need.  Any penalty or interest relief available would be on a company by company basis upon request.

Are masks for employees of essential business sales taxable? Especially in states seriously impacted like New York?

Certain sales to various healthcare providers are exempt without considering COVID.  We have not seen any specific exemptions related to COVID, but it is an area that can be researched on a state-by-state basis to determine any applicable exemption.

How do you think the pandemic will impact sales and use tax collection over the next year or two?

It seems like sales and use tax collections will mirror that of the general economy. We can expect to see sales and use tax collections decline in the short-term (perhaps over the next 6 months or so) and then return to pre-COVID levels in the long term.

If we don't pay out our sales tax now, could we be getting ourselves into trouble down the road? 

A business should be cautious about utilizing sales tax funds to run their business.  In collecting sales tax from your customer, you are acting as a fiduciary of the state where your responsibility is to collect and remit the sales tax.  While deferring the sales tax payment can certainly help cash flow, all the sales taxes that you've collected will eventually be due.

Have most states waived collection for now, or is it just the fees/penalties for late payments that have been waived?

Some states, not all states, have implemented various forms of relief.  This can include a time extension in filing the tax return, tax payment deferral, and waiver of penalty and interest in some situations.  You can visit our post here to see the details by state.

How do you see this impacting other areas of sales tax? Do you think registrations will take longer, notices will come later, etc.?

It's difficult to predict how the current crisis will impact other aspects of sales tax compliance.  Assuming some portion of the government employees are also working from home, it would be expected that their response rates and ability to conduct "business as usual" will also be impacted, resulting in delays in certain areas.

We understand that there are many questions about sales tax, deadlines, and certain exceptions right now. If you’re struggling with sales tax compliance, contact us to see how we can help you. With TaxConnex, it’s all on us.