Some states are considering lowering their Sales Tax in 2022 as a way to bolster their budgets. With the recent recession, however, some states have seen revenue levels dip. With that in mind, they’ve adjusted their budget forecasts downward. However, other states are increasing their Sales Tax collections by increasing consumer spending. These changes are likely to continue into the next decade.
In the next several years, the sales tax landscape will change dramatically. States will pay closer attention to digital advertising and transactions that bundle digital goods. This will complicate the task of determining if a package is taxable, even when the bundle includes tangible goods. For example, the Tennessee Department of Revenue recently ruled that a subscription package that contains at least one taxable item, and one non-itemized price, will be subject to sales tax. These trends are likely to continue as businesses multiply their online sales.
Ogdensburg expects to lose about $1.5 million in sales tax revenues in 2022. In addition, the city has proposed cutting property taxes by 10 percent, which would reduce revenues by about $560,000. Meanwhile, the county is on track to collect a total of $9 million in sales tax this year.
There are many factors that influence a company’s sales tax liability. First, a business must have a “substantial nexus” in a state to be subject to sales tax. This may be based on a number of factors, including physical inventory, employees, affiliates, and the volume of sales.
Ecommerce sales tax is another important consideration for small businesses. Online sales tax varies by location and is often calculated based on the shipping address. It is common for an e-commerce system to calculate the tax based on the billing and shipping address, but when the customer picks up the item, the customer is required to pay sales tax based on the rate charged at the store. In many cases, the rates are the same or differ slightly.
Meanwhile, the speed of technological innovation continues to outpace the ability of state governments and regulators to keep up. For example, Maryland introduced a controversial tax on digital advertisements in early 2021, and seven other states and Washington, D.C. followed suit. While these new laws have their opponents, it’s clear that states are looking for new sources of revenue through emerging technologies.
Ecommerce sales tax collection will occur through each shopping cart, and some of these engines are more sophisticated than others. For example, Amazon’s engine is extremely detailed, while eBay’s collection system allows for one sales tax rate per state. In addition, states can choose to source sales tax in both origin-based and destination-based ways.
A small business owner can also use maps to manage their taxes. These maps show the average tax rate for a specific state. This way, they can charge the average combined rate for all their buyers and not break the bank.
