What's New in State Sales and Use Taxes

There’s always something changing in the world of tax, especially sales tax. And 2021 continues that trend. Here’s a review of some of the recent changes and updates.

In the trendiest sales tax news (aside, of course, from Florida finally passing economic nexus legislation), Connecticut lawmakers have proposed a digital advertising services tax similar, experts say, to one recently enacted in Maryland. The proposed tax would help fund the “Connecticut Equitable Investment Fund,” which would be designed to address socio-economic inequality.

Maryland, which made headlines over the winter with its landmark digital services tax, has apparently had to reckon with some fallout from the measure. Lawmakers in Annapolis have passed S.B. 787, which amends the state’s Digital Advertising Gross Revenues Tax by delaying the start date to Jan. 1, 2022, exempting broadcast and news media entities’ digital advertisement services and prohibiting the pass-through of the tax via a separate charge.

It also amends the state’s sales and use tax expansion on digital products by exempting a limited number of digital services, including live-streamed school instruction, and by expanding the custom computer software exemption.

Observers say the Maryland refinements are expected to become law without the governor’s signature.

Other updates include:  

Illinois has revised its FAQs for marketplace facilitators, marketplace sellers and out-of-state retailers. Topics include food ordering and delivery services; determining tax owed for an out-of-state retailer selling through marketplace and with inventory in Illinois; and reporting sales on state Form ST-1 for a company’s own sales when it also makes sales through a marketplace.

Kansas Gov. Laura Kelly has vetoed a bill which would have set a threshold for out-of-state sellers to establish economic nexus. Currently, Kansas is unusual in that all sellers regardless of number or value of sales must register for a sales tax permit. As of the first week of May, lawmakers have voted to override the veto, meaning that the bill, requiring the collection and remittance of sales and compensating use tax by most marketplace facilitators, will go into effect beginning July 1. In addition to state and local sales and use tax, marketplace facilitators are responsible for collecting and remitting local transient guest taxes beginning Jan. 1, 2022, and certain prepaid wireless 911 fees beginning April 1, 2022.

Louisiana lawmakers are working to centralize the state’s sales tax collections. Proposals would centralize electronic sales tax filings and have them handled by one commission. Supporters reportedly say that Louisiana is one of only three states with a fragmented system, and that it complicates collection of sales taxes from online purchases. 

North Carolina’s Department of Revenue has made a private letter ruling regarding sales tax payments on subscription fees for software as a service (SaaS). The ruling came in response to a taxpayer who licenses a cloud-based SaaS platform for customer engagement and marketing. North Carolina determined that there was no sales tax on these fees because the taxpayer’s customers don’t receive a tangible copy of or an electronic download of the software as part of the subscription fee. North Carolina does not currently tax access to cloud-based software accessed electronically over the Internet.

North Dakota has expanded sales and use tax exemptions for qualifying sales made to senior citizen organizations. The latter includes those that provide services for senior citizens including health, welfare and counseling services, with certain criteria. The legislation is effective June 30. 

Washington has amended its excise tax rule on leases or rentals of tangible personal property to clarify the department’s policies regarding charges for such construction services as concrete pumping. The rule revision clarifies the distinctions between charges for the rental of concrete pumping equipment with an operator, sales of construction services and sales of construction materials.

Wisconsin has eliminated the 200 or more separate transactions economic nexus threshold for remote sellers in the previous or current calendar year. Under the newly enacted bill, an out-of-state retailer with annual gross sales into the state exceeding $100,000 in the previous or current calendar year must register and collect the tax on those sales. 

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!