The explosion of the e-commerce market alone would’ve made handling sales tax obligations in-house tough. Add a tight job market and the task for many companies has become nearly impossible.
First, what’s influencing the availability of workers lately?
- The national unemployment rate dropped to 3.9% by the end of last year, meaning that fewer people willing or able to work are still looking for a job.
- As the pandemic ebbs and flows, workers stay out of the labor market out of fear of COVID, or the inability to work due to a lack of childcare (especially for kids who are schooling virtually), or the need to care for someone who’s sick.
- Previous government pandemic relief efforts have fortified individual savings and allowed people to remain out of work longer, even as wages remain largely stagnant and potentially unappealing to would-be laborers.
- Retirement is increasing, and retirees fearing COVID are not returning to the workplace like they did before the pandemic.
- The Great Resignation continues, with millions quitting their jobs every month into the last quarter of 2021.
Due to all of the above, it’s hard to fill any position at this point, but a job with specific skills, especially with experience managing sales and use tax, can be downright impossible. The right person to manage sales tax obligations for your company needs a lot in their toolbox: sales tax knowledge or expertise, adaptability to keep up with rules and deadlines and thorough knowledge of your operations to know where your employees are located, new states you have sales in, traveling employees and so on.
Despite the employment landscape, the need for hiring remains strong – especially for sales tax compliance. According to TaxConnex’s recent market survey of 100 top finance professionals, most respondents (79%) say their growth plan for the next 12 months involves hiring employees out of state (as well as acquiring customers or otherwise increasing the number of states in which they’ll need to collect and file sales tax).
Just as important, 41% of respondents use internal sources to prepare and file returns and even more (56%) utilize internal resources to manage jurisdictional notices and communications.
Sales Tax Continues to Become Harder to Keep Up With
In the three calendar years following the Supreme Court’s 2018 Wayfair decision, the last of the states with a sales tax (Florida and Missouri) finally passed economic nexus legislation. (In Alaska, which has no state sales tax, communities continue to band together to enforce economic nexus and sales tax collection at the local level.) States are also taxing a broader base of items including Software-as-a-Service (SaaS) and digital advertising.
Fueled by the pandemic, online shopping has rocketed past even the rosy predictions from before the pandemic and during its early days.
Some analysts, for instance, predicted two years ago that 2020 total e-retail sales would grow 2.8% year over year – later even predicting a big decline to account for “the shock” from pandemic lockdowns. When retailers pivoted to online operations, though, 2020 e-sales grew 3.4%. Nearly 8% growth was expected in 2021.
Long term, U.S. e-commerce sales were around $768 billion last year, according to Statista, which predicts that e-commerce will grow around a steady 14% annually in the U.S. over the next three years. Globally, more than nine out of 10 internet users have purchased products online. It’s estimated that within 20 years, 95% of all purchases will be through e-commerce.
Domestically, that’s turned into a lot of tax revenue. Arkansas, Kansas, Pennsylvania, Tennessee, Texas and Florida were the latest states to report sales tax revenue shattering predictions. Local jurisdictions from Geneva, N.Y., to Santa Barbara, Calif., jubilantly report that sales taxes are a major (and surprising) factor in keeping their coffers full. Many credit online sales.
Expanding sales tax obligations are a concern of many execs, according to TaxConnex’s recent survey. Nine out of 10 respondents listed the following as their top concerns moving into 2022: keeping up with states’ changing nexus rules; understanding the taxability of products or services; the threat of audits; or filing returns and paying sales taxes due on time.
Almost three-quarters of respondents said online sales have become a bigger percentage of their revenue over the past two years – yet only about a third report being happy with their approach to managing sales tax.
So a lot of indicators point to a tough time ahead for sales tax compliance even as jurisdictions discover how lucrative that revenue can be. Can audits and stricter enforcement be far off?
As sales tax increasingly becomes more difficult or more of an obligation for your company, don’t let it overwhelm you or your team. Rely on sales tax experts to maintain your compliance. Contact TaxConnex to learn what it means when sales tax is all on us.