A review of what’s been happening and updates states have made in sales & use tax so far in 2020.
Second-quarter state and local tax receipts (consisting of sales, income, property, and excise tax) came in about 3.8 percent lower than they did in the same quarter a year ago, according to reports cited by the Tax Foundation. Income and sales taxes fell considerably while property and excise tax collections remained stable.
Sales taxes in the second quarter of this year plummeted 9.8 percent compared to the same quarter in 2019. Much of the revenue lost is due to business closures and stay-at-home orders (many of which have either been lifted or are less stringent now).
State and local spending, meanwhile, came in 0.7 percent lower in the second quarter of 2020 than it did in the second quarter of 2019. States are using federal aid, and the expectation of recapturing delayed collections, to keep spending more stable than tax revenues.
Overall, tax collections are about 0.5 percent lower in the first half of 2020 than in the same six months of 2019, though the pre-pandemic growth in much of Q1 will continue to be eroded by losses afterward – and losses are predicted to continue to accumulate.
Colorado’s Department of Revenue has launched a Sales and Use Tax Simplification Program, an online filing portal for a single point of remittance for all state-collected sales and use taxes and local sales and use taxes of home rule, self-collected municipalities. Since the launch, some municipalities have also adopted the Colorado Municipal League (CML) Model Ordinance on Economic Nexus and Marketplace Facilitators (Model Ordinance), meaning they can impose economic nexus and marketplace facilitator collection laws when sales into the state (and not just into the municipality) top $100,000 annually.
Florida reports sales tax collections for July were $165.2 million below a January forecast. While down, that was an improvement over sales tax collections that plummeted in April, May and June as the pandemic caused many businesses to shut down or scale back operations. Nearly all of the loss is attributed to declines in the tourism and hospitality-related industries.
Massachusetts has decreed that the presence of one or more employees working remotely from Massachusetts solely due to COVID-19 pandemic-related circumstances will not trigger nexus for sales and use tax collection purposes.
In Michigan, an Indiana-based company’s supply of manufactured and marketed orthopedic implants (such as prosthetic joints) was properly subject to use tax, as the taxpayer did not totally relinquish control of the property when it shipped it into the state. Also, PPE qualifies for an industrial processing exemption if it meets certain criteria.
Ohio has revised sourcing statutes. For the sourcing of sales for state Ohio sales tax purposes, marketplace facilitators source sales they facilitate (excluding sales of motor vehicles, titled watercraft, and titled outboard motors) to the location where the consumer receives the property or service. When the marketplace facilitator makes direct sales that are received in Ohio, the sales are sourced to the location where the order is received.
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.