A review of what’s been happening and updates states have made in sales & use tax so far in 2020.

The District of Columbia attorney general is suing grocery-delivery service Instacart for failing to pay hundreds of thousands of dollars in District sales tax.

Wyoming lawmakers have declined to move forward with two bills to increase and broaden the state’s sales and use taxes, news outlets said.

Weeks ago, state tax authorities lent a hand to companies ravaged by the pandemic and postponed sales-tax filing and payment deadlines. But that extra time is about to run out.

Some states have postponed sales-tax filing and payment deadlines well into the weeks ahead, part of a COVID-19 relief effort for battered businesses. States and even localities have differed in how they are handling the deferments. Some deferments relate to filing and payment, some just payment, and some states are granting deferments only when requested.  

As a few states tiptoe into re-opening during the COVID-19 pandemic, more states have joined previous warnings that the loss of sales taxes is going to hit soon – and hard.

Sales into the state of Alaska have always been exempt from state level sales tax; however, many of the local jurisdictions in Alaska have enforced sales tax collection at the local level provided a business has a physical presence.  Now, with Wayfair, even remote sellers need to worry about collecting the local sales tax in Alaska.

Many businesses that were forced to shut down by governments trying to deal with COVID-19 are the very businesses governments rely on for sales tax obligations. And because of this, many state and local taxing jurisdictions are seeing the first signs of revenue shortfalls.  Here’s what we are seeing:  

As businesses adjust to the “new norm” of working remotely and managing cash more closely than ever, several states are postponing deadlines for filing and paying sales and use taxes, often waiving penalties and interest. In just a few examples, many states are offering 30-day extensions to file and pay, California is offering extensions of up to three months, and Maryland and Massachusetts have pushed their sales and use tax deadlines to June. (see other tax updates here.) 

Three months in and it’s already been a hectic year on many fronts; sales and use taxes have been no exception. Developments in 2020 so far include: 

If you thought 2019 was a confusing year for sales tax, wait for 2020, as more states continue to adjust their sales-tax laws.

Twenty-four states and the District of Columbia added enforcement of economic nexus in 2019, in addition to the 19 that added the burden to online retailers in 2018 after the Supreme Court overruled the physical presence rule in South Dakota v. Wayfair, Inc. More than ever, out-of-state sellers with threshold limits of sales in a given state must collect and remit sales tax.

Economic nexus laws are expected to continue to change in 2020 with updates projected from several states and with the addition of more states adopting Marketplace facilitator laws there is even more to keep watch for.  

As if sales tax wasn’t enough for online retailers, some states are working to make retailers pay corporate income tax as well.

The amount of corporate income taxed will be based on the retailer’s local economic activity, similar to how many assess sales tax.  Many of these new laws will kick in next year, giving retailers a Happy New Year gift of more forms to file, more money to shell out and more compliance traps to fall into.

Why would states go through all the trouble of enacting economic nexus to grow their tax coffers and then ease off on the restrictions - especially big states like New York and California, which were once expected to garner nine and even ten figures in tax revenue from nexus legislation?

I am honored to share that TaxConnex has recently been selected by Venture Atlanta to Present at Venture Atlanta 2019.  Venture Atlanta, the Southeast’s technology innovation event, is where the region’s most promising tech companies meet the country's top-tier investors.

This year the Commonwealth of Pennsylvania is joining a number of other states in the U.S. that have already defined economic nexus for its sales tax as it applies to online sellers.  

Approximately 58% of the 65,000 voting-aged residents of Beaufort County, South Carolina have approved a 1% sales tax rate hike within the county, which will go far in helping raise some much-needed funds to help the county take on new projects.  The first projects will be getting underway soon now that the funding is in place.