States are still reeling in sales tax deficits brought on by the economic downturn during the pandemic, but the addition of economic nexus has appeared to have somewhat alleviated the deficits. States are starting to see an increase in online sales tax collections as more and more people remain online for work and shopping.
Michigan media reports that its state legislators made a good move at a good time regarding nexus and sales tax obligations: Gov. Gretchen Whitmer signed into law a group of bills that made it easier to collect sales tax from a broader number of online transactions just weeks before COVID shuttered businesses.
Though additional sales tax collected is still difficult to tabulate, it’s contributed to one of the state’s healthiest revenue streams.
The state still predicts a nearly $1 billion budget shortfall for FY20 but online sales tax revenue has grown exponentially.
Online sales tax revenue compared to the same period in 2019 increased $140 million between April and July.
Texas, even as a pandemic rages and wanes, is also enjoying a bump in sales tax revenue for fiscal 2020: $34.10 billion, up 0.2. percent over FY19.
Retail trade tax collections were also boosted by online out-of-state vendors and marketplace providers who did not have tax collection obligations a year ago, Comptroller Glenn Hegar said.
Most August sales tax revenue is based on sales made in July and remitted to the agency in August.
Total sales tax revenue for the three months ending in August 2020 was down 2.7 percent compared with the same period a year ago. Sales tax is the largest source of funding for the Texas budget, accounting for 59 percent of all tax collections. The effects of the economic slowdown and low oil prices also were evident in other sources of revenue in August 2020.
In Kansas, online sales helped the city of Manhattan bump sales tax revenue for the first time since the pandemic began. In June, the city collected more than $964,000 in sales tax revenue – more than Manhattan collected in June of 2018 or 2019 and the first time since February that the city is seeing more revenue than was budgeted for the year. Online sales accounted for $166,000 in online sales tax in June.
In Oklahoma, “a small increase” online sales helped partially offset a 4.6% slide in the state’s sales tax receipts in August compared with the same month a year ago.
Tennessee will lower its nexus threshold on Oct. 1. Out-of-state businesses and marketplace facilitators must collect and remit the state’s sales tax if their annual sales into the state exceed $100,000. The current threshold is annual sales into the state exceeding $500,000.
Sales tax non-compliance can add significant risk to your business. We can help you comply and stay on top of this ever-changing tax environment. Contact us to learn about the latest developments in sales-tax nexus and what they mean to you and your company.