What was new in September for state sales and use taxes

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.

Inflation bites. The Urban Institute told news outlets that 25 states recently reported year-over-year declines in sales tax receipts, a jump of more than a third in just a month. Less consumer spending amid persistently higher prices apparently triggered a decline in revenues.

Sales tax revenues were widely expected to decrease after seeing a boost in 2021 due to federal stimulus and a pandemic-era shift to consumption of goods over services, reports added. Nationwide, sales tax receipts were up 1.5% year-over-year as of June. At the beginning of this year, revenues were up 12.3% in real terms.

Several states, including California and New Jersey, have projected a slowdown in sales tax growth in the next fiscal year. Minnesota also reported a slower-than-forecast August for sales tax.

Overall sales tax collections remain above pre-pandemic baselines in most states, even if the rate has slowed. Arkansas, Massachusetts, New York, Texas and Tennessee were among states that recently beat year-over-year or projected sales tax revenues.

Blue bayou. Auditors reported problems with the Louisiana Sales and Use Tax Commission for Remote Sellers. Among issues: inadequate assurance over internal controls; inadequate controls over bank reconciliations; and lack of written policies and procedures. The Commission has been charged with simplifying one of the nation’s most complex state sales tax systems.

Elsewhere

California Gov. Gavin Newsom has vetoed a sales tax bill that would have cost cities and counties in the state more than $2 billion. The vetoed measure would have added locally approved tax rates to the current state General Fund-only sales and use tax exemption for the purchase of manufacturing equipment. The exemption included no requirements that would have benefited local governments.

Also in California, insurance giant GEICO has agreed to pay $19.1 million as part of a settlement to resolve allegations it failed to pay sales tax when paying out total loss claims.

Kansas businessman James Morey, 68, of Lawrence, pleaded no contest to two counts of theft related to sales tax. Morey failed to remit sales taxes that he collected while operating two businesses; he told investigators that he used the sales tax money from the businesses for personal reasons. Morey was sentenced to pay $54,823.25 restitution and a $500 fine and to serve 30 days in jail.

Kentucky has released a “Sales Tax Facts” sheet detailing services that become taxable as of Jan. 1, 2023. The taxation of these additional services creates significant changes to previous guidance.

Minnesota revised its sales tax fact sheet regarding the application of sales and use tax to digital products to include non-fungible tokens (NFTs), stating that NFTs are subject to sales and use taxation when their underlying products are also subject to tax.

A Missouri nonprofit providing social and housing services qualifies for a charitable sales and use tax exemption in addition to a previously granted civic exemption, the state supreme court held in Beyond Housing Inc. v. Director of Revenue.

South Carolina has issued an information letter updating local sales and use tax and exemption information for counties, as well as a sales and use tax chart for the Catawba Indian tribal government.

South Dakota Gov. Kristi Noem is proposing a permanent sales tax cut on groceries. Noem said the proposed policy would be worth more than $100 million in tax cuts, the largest in state history. South Dakota is one of three states that impose a full sales tax rate on food.

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.