There’s always something changing in the world of tax, especially sales tax. Here’s a review of some of the recent changes and updates.
Virtual reality. Sales tax on digital products was the subject of a white paper draft at the Multistate Tax Commission’s annual meetings in Anchorage, Alaska. The purpose of the project: help states develop a simpler and more adaptable approach to taxation of digital products.
Questions to stakeholders as part of the draft included: Which states have the best and worst approaches to taxation of digital items and why? Which have the best guidance for taxpayers? And would it be simpler if states would allow taxpayers to build in the cost of the tax, rather than charging it on the bill or invoice, making the tax work more like a gross receipts tax?
Stakeholders responded that challenges currently include how to tax software depending on how it is sold (TPP vs. SaaS vs. downloaded), a burden that leads to greater risk of error; and that taxing digital goods and services through a sales and use tax is best.
The draft is on the MTC site here.
The up and up. Sales tax revenues continue their robust pandemic-driven rise in many states.
- Massachusetts reports that sales and use tax collections for August totaled $825 million, $112 million (15.7%) more than August 2021.
- Georgia’sgross sales and use tax collections approached $1.48 billion for the month, an increase of $156.4 million (11.9%) over FY 2022. Net sales and use tax revenue jumped $73.3 million (11.1%) compared with August 2021.
- Indiana had monthly collections from sales tax jump 6.5%.
- Earlier in the summer, New Jersey’s sales and use tax took in $1.332 billion, an increase of $113.9 million (9.4%) above July of last year.
- Texas total sales tax revenue for the three months ending in August was up 14.7% from the same period a year ago, with online shopping helping lead the increase.
In Colorado, the Denver City Council has proposed an amendment to the tax code exempting a new state delivery fee and other certain government fees from sales or use tax. On July 1, a statewide 27-cent per sale delivery fee took effect in Colorado for retailers or marketplace facilitators that collect sales or use tax on the sale of tangible personal property sold and delivered (including delivery performed by a third party) to a purchaser in the state. The delivery fee was excluded from the state definition of purchase price. Denver City/County is a home rule jurisdiction, so the state statutory change did not automatically apply to the municipality’s definition of purchase price.
Georgia has updated its sales and use tax exemption for admissions to some fine arts performances and exhibitions through Dec. 31, 2027.
Indiana has updated a sales tax information bulletin to reflect changes to the treatment of sales by nonprofits according to legislation enacted in March.
Pennsylvania has ruled in Online Merchants Guild v. Hassell that out-of-state sellers using the Fulfillment by Amazon program did not have the minimum contacts necessary with the state to be subject to the state sales tax or personal income tax, finding that the storage of merchandise by Amazon in Amazon warehouses in the state insufficient.
In Texas, in Coppell v. Hegar and Round Rock v. Hegar, a county district court has ruled that the state comptroller violated the state’s Administrative Procedure Act by adopting a rule amendment in 2020 that altered sourcing and allocation of local sales tax revenue from internet sales by in-state retailers.
Virginia has determined that a remote seller’s use of banner advertisements for sales promotion did not trigger sales and use tax nexus requirements. Also, the taxpayer didn’t provide sufficient details of the parent company’s activities in Virginia, or the taxpayer’s relationship to the parent, for the state to definitively rule on nexus.
If you think your business may be impacted by sales tax developments, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.