Monthly State Sales and Use Tax Update

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.

Developing updates

There are currently five states with no state-level sales tax. Might that be changing? Take a look north.

Alaska has long heard rumblings of a statewide sales tax. First came the state’s Remote Seller Sales Tax Commission of municipalities banding together to tax sales. Then more recently Gov. Mike Dunleavy confirmed that he’d support the first statewide sales tax under certain conditions – perhaps without even putting the measure to voter approval.

Now Alaska has a bill that would adopt a 2% state sales and use tax and enter the Streamlined Sales and Use Tax Agreement. Collection of the taxes would be centralized to the Alaska Department of Revenue, with proceeds remitted back to municipalities. This proposal is still in the early stages but stay tuned.

State revenue updates

Tennessee has become yet another state to beat expected tax revenues. August revenues were $1.4 billion, $255.8 million more than August 2020 and $267.9 million more than budgeted estimates. The growth rate for all Tennessee taxes in August was 22.11 percent. Sales tax revenues and state corporate tax receipts (franchise and excise taxes) both posted substantial growth.

In Georgia, tax collections were up 12.7% in August year over year. The gross sales tax take finished 15.9% over August 2020; income tax collections were up 13.9%. As is the case in many states, the two taxes are the state’s largest sources of revenue.

State Updates

California has presented to the governor for his signature AB 1402, which requires marketplace facilitators to register, collect and remit specified fees on the retail sale of tangible personal property in the state.

The state has also proposed amendments to regulations governing drop shipments to clarify that marketplace sales are not drop shipments. Drop shipments in California have been sales made by a retailer not engaged in business in California but who sells tangible personal property to Californians through the purchase of the property from a supplier (the drop shipper) who ships the property directly to the purchaser. The drop shipper engaged in business in California is then reclassified as the “true retailer” and responsible for collecting and remitting tax on the sale.

Under the proposed reg, when a marketplace seller contracts to purchase property from a supplier and has the supplier (acting similar to a drop shipper) deliver the property directly to the California purchaser, the supplier is not a drop shipper responsible for tax collection and is not considered the “true retailer.” Instead, the tax collection remains the responsibility of the marketplace facilitator.

Illinois now allows certain marketplace sellers to file for a credit for retailers’ occupation taxes remitted on sales for which use tax was also collected and remitted by a marketplace facilitator. The bill amends a previous double taxation issue on sales. Credits may be claimed for taxes on sales from 2020 provided the marketplace seller can demonstrate use tax was remitted by the marketplace facilitator.

Oklahoma’s sales and use tax rule change on multi-level sales now details that if the products are not sold from the multi-level vendor in their original form and packaging to the distributor, the distributor is required to collect tax on the sales price of the final product sold to the consumer.

West Virginia has issued a publication to “clarify the sales and use tax obligations of entities selling streaming services in this state.” Streaming services are subject to West Virginia state and municipal sales taxes since West Virginia taxes all services unless a specific exemption applies, and no exemption applies to streaming services.

The publication explained that “streaming services providers” supply entertainment (music, movies, video games, etc.) or other electronically delivered content. These services are distinguishable from “digital products,” which involve consumer downloads of a “discrete identifiable product” and are not covered by the publication’s guidance. For streaming services, a consumer has purchased “access to curated entertainment content in the streaming service’s catalog but has not procured a right to any specified digital product. 

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.