What’s new in sales tax for April?

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.

Leveling the field. A bill that would raise the online sales tax in Alabama is progressing with state lawmakers. The current Alabama sales tax is 8% for online purchases, the same as for purchases at the state’s brick-and-mortar stores. The bill would raise the sales tax for online purchases in the state to 9.3%, claiming that the increase levels the field between online shopping and buying from local stores. The rate would be recalculated every five years.

Supporters, including brick-and-mortar retailers, reportedly said that the 8% rate for internet sales put them at a disadvantage as many of them operate in communities with higher combined sales taxes.

Voters throw a huge block. In Kansas City, the Royals of Major League Baseball and the Chiefs, last year’s winners of the National Football League Super Bowl, are threatening to leave the city after residents of Jackson County, Missouri, voted down a measure that would have helped fund a new ballpark and renovations to the Chiefs’ home Arrowhead Stadium.

The NFL’s Buffalo Bills, on the other hand, are getting not just $850 million in public funds toward their new billion stadium but also a tax break worth tens of millions in sales tax on personal seat licenses. The team expects to raise hundreds of millions of dollars from the sale of PSLs, meaning that avoiding the 8.75% sales tax can turn into an additional subsidy of $25 million or more.

Pot luck. The U.S. Census Bureau now has an interactive map of states’ takes in cannibus excise sales taxes. Leading states, according to the chart, are Washington (1.37%), Colorado (1.23%) and Montana (1.09%).

Elsewhere

Louisiana’s Board of Tax Appeals has granted summary judgment for the taxpayer in DirecTV LLC v. City of Baton Rouge, a case involving the fine difference between tangible personal property and mere access to that property. Local governments in this case contended that video-on-demand and pay-per-view programming should be taxed as tangible property due the definition including items that “can be seen, weighed, measured, felt, touched, or is in any other manner perceptible to the senses.” DirecTV countered that they sold only access to the programming itself, which would be tax exempt.

Minnesota may enact legislation to tighten guidelines on creation of local sales taxes. Until recently, news stories said, most local sales tax were in cities and regional hubs. In the last five years, sales taxes have been enacted in suburbs and rural cities, with more cities making the argument that projects should be funded with a sales tax. Rules around sales taxes require the projects to be a “regional benefit,” a nebulous term. Bills in the Senate and House tax committees aim to provide some guidelines around what projects are of regional benefit and should be eligible for sales taxes.

Mississippi’s back-to-school sales tax holiday this summer could be earlier than in previous years. If signed into law, legislation will move the state’s holiday for 2024 to July 12-14.

New Jersey has begun a multi-phased modernization of its tax-filing system.

In early 2025, sales and use tax filers and tax preparers will have a new self-service portal that aims to provide more control over taxpayer’s own accounts, providing faster access, easier filing and better assistance with tax account information. Sales and use will be the inaugural tax to be serviced.

The New York Appellate Division has upheld a ruling that a business that creates and provides recommendations based on data from advertising campaigns is providing taxable information services. The Division maintained the lower court’s ruling that the services of consulting provided with the reports did not make the service non-taxable and addressed the question of whether the information services themselves were taxable.

Rhode Island has released a specialized tax guide for contractors doing business in the state, intended to be “a plain language discussion” of the interaction of the Rhode Island General Laws with the construction industry. It is not a substitute for the Rhode Island General Laws or for Rhode Island Division of Taxation regulations, rulings, or notices.

South Carolina has stated that a company’s sales and rentals of digital textbooks are exempt from sales and use tax. The state’s department of revenue stated in the private letter ruling that textbooks purchased for and used in institutions of higher learning as part of a prescribed course of study are exempt regardless of the format. The DOR examined whether the charges for digital textbooks are taxable as “communication services,” determining finally that students who purchase the digital textbooks are given an access code, which makes available only the digital textbook that they have purchased or rented. As such, students are not paying for access to or use of a communication system.

Tennessee tax revenues exceeded estimates in March. Revenues totaled $1.67 billion, $55.1 million (3.42%) more than the state received in March 2023 and $17.6 million more than the budgeted estimate. Sales tax revenues were $49.8 million more than the estimate for March and were 6.3% more than March 2023.

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.