Issues to Spot in Sales Taxes for 2022
Since the imposition of Sales Taxes based on economic nexus last 2018, data has shown a steady rise in sales tax revenue. This growth is fueled partly by the increased spending brought by the pandemic.
According to data supplied by the National Association of State Budget Officers, the median growth rate of sales tax revenue increased around 9% for 2021. This figure could be attributed to different factors which might include the diversion of spending from service to retail. Secondly, the stimulus checks provided by the government gave a boost of purchasing power to the public. Lastly, the widespread application of the sales tax on online sales since 2018.
Because of the growing significance and complication of sales taxes, we list in this article the top issues a business owner could face this year.
Sales Tax depends on the locality
Some localities have their own version of the sales tax although they usually follow the laws set by their state. As a result, different states have different rules for sales tax. In this scenario, one transaction could have different tax responsibilities. For example, if you buy from Amazon a state could require Amazon to remit sales tax to the locality, while the retailer who is a private individual could be required to remit the sales tax to the state.
Efforts to simplify sales taxes
Today, the case of Halstead Bead v. Lewis is pending review where Louisiana’s complex sales tax is being questioned. This case could urge states to modernize their tax code. In this case, Halstead claims that the overly complicated sales tax collection system of Louisiana is an undue burden upon his business. They estimate that for every $1 they make they need to pay $2.28 to the state. This case will need to revisit the outdated tax systems and update them.
Because of this possible new jurisprudence, other states could be looking to update their tax systems ahead. They could look into following the Streamlined Sales and Use Tax Agreement (SSUTA) which aims to simplify state and local tax definitions and rates to minimize the costs of retailers. Right now, 23 out of 44 states that have a sales tax are following the SSUTA.
Compliance with tax reporting
When the Wayfair case was decided in 2018, sales tax became shrouded in mystery. New rules needed to be studied and limits needed to be tested. After 3 years of testing the waters, the states are now ready to take a more aggressive stance when it comes to enforcement against online sellers.
Business owners that are going online should expect to be questioned about their post-2018 business activities. In any case, if you are looking to sort out your online activities or need guidance in migrating to an online platform, or need advice on how to be compliant with your sales tax, you can count on us to show you the way.