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.
Holiday hucksterism? State sales tax holidays fail to live up to the hype.
That’s the consensus of a recent report from the Institute on Taxation and Economic Policy, which notes that “so far this year 20 states have decided to forgo a combined $1 billion in vital tax revenue in favor of conveniently popular yet ultimately ineffective sales tax holidays.”
One of the biggest culprits in 2022: Florida, which expanded their sales tax holiday programs to five additional (“rather arbitrary”) categories in lieu of targeted, permanent reforms.
Path to simplicity. Louisiana – a state with not only the highest combined tax rate but an infamously complex sales tax compliance structure – is taking steps to address the latter. Three new laws aim to give the Louisiana Sales and Use Tax Commission for Remote Sellers more authority and centralizing sales tax.
- S.B. 235, effective Jan. 1, 2023, says the Commission will develop a single electronic return for all the state’s sales and use taxes, among other administrative moves regarding collection of tax from qualifying non-remote sellers.
- S.B. 244, effective this Aug. 1, enacted uniform reporting for collectors.
- Per S.B. 95, beginning July 1, 2023, local tax collectors have to provide notice of their intent to audit that also “advise[s] the taxpayer that the taxpayer may request a multi-parish audit.”
Free for all. Several states tinkered with their sales tax exemptions this summer. Among them, alphabetically:
Idaho will exempt qualified semiconductor projects on construction and building materials.
Indiana has a new threshold for exemptions for nonprofits, which must now see sales of less than $20,000 in a year.
Iowa exemptions now include diapers and feminine hygiene products, specified digital products and prewritten computer software. Exemptions have also been broadened for items and services used by a manufacturer to produce food.
Louisiana will exempt many prescription drugs from local sales taxes.
Maryland will begin exempting items including baby products like diapers, car seats and bottles, in addition to medical items like thermometers, masks, diabetic care products and oral hygiene products.
Mississippi specified that its exemption for health care facilities paying sales tax on construction materials and machinery and equipment purchased within three months of completion of construction does not include medical marijuana establishments.
Oklahoma now provides an exemption to nonprofits dedicated to disaster recovery.
Virginia will exempt network equipment if it’s used for video broadcasting or by phone carriers.
Iowa has modified its sales tax base. Changes include combining sales and use tax returns and their permits into one and changing filing frequencies for sales and use tax from quarterly to monthly.
Maryland has revised Business Tax Tip #29 to acknowledge exclusion of certain business purchases of digital products. The guidance also clarifies taxability of data processing, information, web hosting and digital advertising services.
New Mexico, with a condition, has become the first state in years to reduce its state sales tax (aka, the state’s gross receipts tax). The rate has dropped from 5.125% to 5%. A further reduction to 4.875% is slated for mid-2023. If the revenue from the gross receipts tax in any single fiscal year from 2026 to 2029 is less than the 95% of the previous year’s revenue, the rate will return to 5.125% on the following July 1.
Additionally, the state will begin exempting all feminine hygiene products from the base at that same time.
Tennessee has ruled that fees that a marketplace facilitator charges for connecting buyers and sellers and processing payments are not subject to sales tax. Fees charged to the marketplace seller and service providers are not subject to sales tax because the “true object” of the transactions covered by these fees are lead generation and payment processing, which are not taxable services in Tennessee.
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.