There’s always something changing in the world of tax, especially sales tax. And 2021 continues to prove that. Here’s a review of some of the recent changes and updates.
Biggest news: Missouri will likely soon join fellow holdout Florida in establishing economic nexus requirements. (They were the last two states with a sales tax to set up such requirements.)
The Missouri Legislature has passed S.B. 153, which the governor is widely expected to sign. Vendors with cumulative gross receipts from the sale of tangible personal property into the state of at least $100,000 in the previous or current calendar year will be required to collect and remit tax; the bill also requires marketplace facilitators to collect and remit use taxes on behalf of the third-party sellers utilizing their platform on that day. The law kicks in on Jan. 1, 2023.
Also in May, Kansas lawmakers overrode the gubernatorial veto on Topeka’s Senate Bill 50, which requires marketplace facilitators to collect and remit sales and use tax and sets a new remote seller tax collection threshold for the state. The bill requires the collection and remittance of sales and compensating use tax by most marketplace facilitators beginning July 1. Those with annual gross receipts from sales sourced into Kansas exceeding $100,000 are subject to the requirement.
Marketplace facilitators that reach the $100,000 threshold for the first time in the current calendar year must also collect and remit the tax on cumulative gross receipts from sales into the state of more than $100,000 during the current calendar year. (The state may waive the collection requirements if the marketplace facilitator shows that substantially all of its marketplace sellers are already collecting and remitting taxes.) Beginning April 1, 2022, a marketplace facilitator obligated to collect sales tax is also required to collect and remit prepaid wireless 911 fees.
Turns out the pandemic may not have hurt states’ sales tax revenues like originally thought. One expert has reported that states have found themselves with unexpected budget surpluses due to sales taxes collected from online sales during the pandemic.
Online sales skyrocketed in 2020 – a trend only expected to continue. Many states are finding that online sales have diffused previous dire predictions about how the pandemic would hammer tax revenues. South Carolina sales tax collections are 10% greater than predicted this budget year. Ohio’s sales tax collections were 23% over predictions recently. Kentucky saw sales tax receipts in April hit $486.5 million, an all-time monthly high and 40% above April 2020. The list of states making similar reports gets longer each day.
States don’t seem to be sitting back on their unexpected riches: Online sales are clearly too rich a lode to ignore. Digital services is a hot new area in which to require collection and remittance of sales tax – especially after Maryland broke the ground of taxing digital advertising earlier this year. Additional federal funding may also soon become available to intensify compliance.
In short, the recently rosy numbers may only encourage state revenue agencies to increase enforcement. Stay tuned.
Arkansas: The Revenue Legal Counsel division of the Arkansas Department of Finance and Administration has published a Revenue Legal Opinion determining that cloud-based software that allows customers to monitor and prioritize the usage of internet bandwidth is not taxable.
Colorado: Small businesses are scheduled to convert to destination-based tax sourcing by July 1. But problems have arisen, and a bipartisan pair of senators wants to push the date back.
Washington: The state Department of Revenue has issued Excise Tax Advisory 3223.2021, providing guidance on the proper taxation of grocery food and restaurant delivery services provided through marketplace facilitators. Marketplace facilitators that are facilitating the retail sale of prepared food or groceries through its marketplace are responsible for collecting and remitting sales tax on “the full selling price charged to the customer for taxable products, including delivery fees, service fees, and any other charges paid by the customer.”
If you think your business may be impacted by sales tax developments, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.