This article was written for the Atlanta Business Chronicle Leadership Trust. To see the original post, click here

In the fall of 2020, I published an article on how the sales tax picture is changing due to COVID-19. Now that we’re over a year into the pandemic, I wanted to provide an update on the sales tax landscape, what predictions have remained the same and what’s changed.

nuancesoftsalestax-resizedAs mentioned in 2020, the pandemic changed life as we know it: From family events to work, education, and business, life went virtual. While things are increasingly going back to some level of normalcy, some things may never be the same. When it comes to the pandemic, sales tax was impacted just like every other aspect of our lives. But how did it change, and what’s to come?

The pandemic slowed life — and retail and tourism spend — to a crawl. Jurisdictions’ sales tax revenues suffered — though predictions were sometimes far worse than reality. Their saving grace? E-commerce.

As brick-and-mortar stores became increasingly inaccessible, e-commerce boomed. According to data collected by Statista, adjusted U.S. retail e-commerce sales were a little over $150 billion in the first quarter of 2020. For the last three quarters of the year, those sales hit on or above $200 billion each quarter. Online’s share of total retail sales blew away earlier predictions, hitting 21.3% in 2020 — reportedly the biggest year-over-year jump for U.S. retail sales ever recorded.

Widespread quarantines and lockdowns and the resulting remote work and education resulted in a spike in demand for software and collaboration tools to assist with the changes. Video and chat software became a necessity for family, friends, schools, and businesses to connect. Digital media and streaming services benefitted from everyone stuck in their homes. As movie theaters closed, production companies looked to streaming services as a way to release new content and produce some sort of revenue while entertaining the public who remained in lockdown.

As a result of the economic nexus rules established in the previous year, plus mushrooming sales, more online businesses than ever were likely to incur sales tax obligations in new states and jurisdictions.

Latest developments

Due to the dependence on sales tax collections, jurisdictions continue to look for new ways to increase their sales tax revenues. This is most clearly shown in recent developments in two states.

Earlier this year, Florida enacted legislation that imposes sales tax economic nexus on remote sellers. Missouri, the final holdout state, followed suit a few months later when Gov. Mike Parson signed SB153 (combined with SB97) into law, though their law does not go into effect until 2023.

Robert Dumas

Written by Robert Dumas

Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2011 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.