States hit ‘Delete’ on some sales tax measures

If it seems like jurisdictions just ceaselessly add additional sales tax laws, statutes and restrictions, recent news out of three states should be refreshing.

North Carolina has become the latest state to ax transaction thresholds for economic nexus. The state’s previous 200-transaction threshold was eliminated effective July 1.

The state’s economic nexus threshold is now just $100,000 in sales into the state annually.

“To reduce burdens on small business and conform to the Streamlined Sales Tax Agreement's best practice, this change would eliminate the 200 transactions as a threshold and leave only the gross sales threshold. Less than half the states currently have the transaction-based threshold,” reads the summary of North Carolina’s House Bill 228 (the bill progressed relatively quickly through the lawmaking process).

North Carolina joins South Dakota, California, Colorado, Iowa, Maine, North Dakota, Washington and Wisconsin in eliminating transaction-based nexus thresholds; some states never adopted one. Studies have begun showing that cutting or eliminating transaction-based thresholds have little effect on tax revenue and that costs of government administration for such thresholds are high.

New Jersey, in a move seemingly counter to a nationwide trend, has repealed its annual sales tax holiday for certain school supplies and sport or recreational equipment.

Bill A4702 “repeals the annual sales tax holiday … for retail sale of computers, school computer supplies, school supplies, school instructional materials, and sport or recreational equipment … The sales tax holiday [was] in effect during the ten-day period up to and including the first Monday in September.” The repeal kicks in after 2024.

Sales tax holidays’ financial relief is debatable but their popularity among states continues, often as political tools to give taxpaying constituents a purported break and local retailers more foot traffic.

That same New Jersey bill phases out the state’s sales and use tax exemption on zero-emission vehicles: The sales tax rate will be 3.3125% on sales on or after Oct. 1, 2024, and before July 1, 2025. For zero-emission vehicles sold on or after July 1, 2025, the sales tax rate will be 6.625 percent.

Vermont lawmakers have overridden a gubernatorial veto and passed legislation to repeal, as of July 1 this year, the state’s sales and use tax exemption for remotely accessed prewritten computer software, aka cloud software or Software as a Service (SaaS).

The software, now classified as “tangible personal property,” becomes subject to Vermont’s 6% sales and use tax.

Classification of SaaS for sales tax purposes has become trickier even as this technology becomes the preferred and prevalent way for vendors to deliver software.

Let TaxConnex manage the burden of keeping up with all the changes and challenges that come with sales tax compliance. Contact us to learn what it means when sales tax compliance is all on us.