There’s always something changing in the world of sales tax. Here’s a review of some of the recent updates.
Another one down. Alaska’s Remote Seller Sales Tax Commission confirms that the state will join the growing number of jurisdictions to repeal the transaction count requirement for determining economic nexus, effective next year. The Commission has amended the Alaska Remote Seller Uniform Code to ax the 200-transaction threshold, and after Jan. 1, 2025, sellers will only have to register with the Commission if they exceed $100,000 in gross sales (including marketplace sales) within the current or previous calendar year in the state.
(Alaska, officially still a NOMAD state, has no state-wide sales tax, but communities continue banding together to mandate collection and remittance of local sales tax.)
Simply put. A recent U.S. Senate subcommittee hearing examining relief for small businesses from remote sales tax collection saw testimony from, among others, Craig Johnson of the Streamlined Sales Tax Governing Board and Diane Yetter of the Sales Tax Institute, who said that sellers generally want to comply with their sales tax obligations but that states can and should take a greater role in simplifying the hodgepodge of American sales tax.
Fixing the correct tax to collect from customers “shouldn’t be a guessing game for the seller,” Yetter said. “States need to make the taxability rules, as well as rates and boundaries clear, accessible, understandable and fair.”
“Our member states have recognized the simpler you make the laws for sellers to comply with, the greater the voluntary compliance,” Johnson said.
Everything old is old again. The Tax Foundation has released “Modernizing State Sales Taxes: A Policymaker’s Guide,” examining both the necessity and obsolescence of modern sales tax.
Sales tax is the second-largest source of state tax revenue and an important source of local tax revenue, but decades of base erosion threaten the tax’s share of overall revenue. Policymakers should explore sales tax base broadening to certain excluded goods and services (including newly arising digital products), particularly as an offset for other tax relief, the report says.
Louisiana, for example, has a proposal to replace income tax cuts with sales taxes to services not currently taxed and by making a temporary sales tax permanent. Proposed sales tax changes could affect delivery, shipping, freight and transportation associated with a taxable sale of tangible personal property or services, among many other goods and services.
Elsewhere
California’s Franchise Tax Board has proposed updating sourcing rules for sales of intangibles. These changes aim to simplify compliance and tax administration by revising sales assignment rules and establishing specific guidelines for certain industries. Businesses such as management, tax, accounting, payroll, legal, business advisory, tech consulting and investment advisory may be affected.
Also, California has enacted S.B. 1144, which, as of next July 1, revises the definition of “high-volume third-party seller” to refer to a third-party seller operating on an online marketplace.
Kansas will cut its state sales tax on food to 0% by Jan. 1, 2025, part of a gradual reduction that began last year.
Maine has a revised instructional bulletin on the sales tax obligations for florists. The bulletin provides the sales tax on tangible personal property and taxable services; the computation of tax in florist telegraphic delivery (FTD) transactions; the definition of the sale price; and the tax implications of rentals and purchases for resale and own use.
Massachusetts will hold a tax amnesty from Nov. 1 to Dec. 30 this year, when it will waive most penalties for eligible taxpayers who file outstanding returns and pay tax and interest owed for tax periods with returns due by Dec. 31, 2024. Amnesty requests are due Nov. 1.
Nebraska has changed the state’s local tax rate structure to create Good Life Districts (GLDs) with alternate state and local sales tax rates. The first zones went into effect last April and more GLDs have been approved with effective dates of July 1 and Oct. 1 of this year. Businesses in the state will have to pay special attention to the locations of their sales to ensure they are correctly reporting tax on returns to ensure areas within GLDs are being reported at a lower state rate but a higher local rate.
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.
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