Special Report: How COVID-19 is changing business sales tax obligations and enhancing risk [Part 10]

States Are Seeing Increased Sales Tax Revenues; More Businesses Facing Sales Tax Compliance Risk

COVID-19 Pandemic and Wayfair at 2: Remote Sellers at Risk

Greetings from my home office in NYC. It’s my Week 10 covering COVID-19 changing the way you and I literally live our lives. I’m sincerely hopeful you and your families are safe and well. In this week’s installment of my special report covers how this crisis is impacting businesses, buyers and the tax landscape. You can follow this series and more information on sales and use tax on our blog.

This is the tenth blog in this ongoing series.

Wayfair @2

Two years ago, the Supreme Court in Wayfair v. South Dakota expanded the reach of states to impose sales and use tax obligations on retail and other businesses if they have a certain level of economic activity in a state (so-called economic nexus), no longer requiring a physical presence. As of now, 43 of the 45 states who have sales tax have adopted the economic nexus standard. Florida and Missouri are the two holdouts.

COVID-19

As if that wasn’t enough bad news for retailers and other remote online sellers, the COVID-19 pandemic shopping behavior changed dramatically as the pandemic spread across the U.S. as brick and mortar stores were ordered to close. Many retailers and others quickly adopted new strategies and established or greatly expanded their online selling presence and capabilities.

The move to online purchasing for necessities and most other consumer needs has increased enormously. In fact, online shopping was growing before the pandemic hit. COVID-19 has placed that trend in super-speed mode.

Marketplace Facilitator Laws

Most states that impose general sales taxes have adopted marketplace facilitator laws. Florida, Kansas, Mississippi, and Missouri are the states who have yet to pass such laws. Legislatures in each of these states are expected to introduce marketplace facilitator bills when they return to take advantage of the substantial revenue they desperately need.

The pandemic’s impact on online sales tax revenue

The explosion in e-commerce since early March has resulted in a significant increase in online sales tax revenues in most states. An example of how seismic this change has been can be seen in North Dakota where state sales taxes from remote sellers grew by more than 500 percent to $2.9 million, up from $475,000 just one year ago. The increases in online sales tax collections have been the one bright spot for state tax revenue collections during the pandemic.

What does all of this mean for businesses?

See my article in next week’s Accounting Today for insights into what these trends and developments mean for businesses and state Departments of Revenue now and going forward.

If you are seeking a sales tax automation and compliance platform to help you keep it all straight, sign up for a demo of CCH® SureTax® platform.

NOTE: CCH Incorporated is not engaged in rendering legal, accounting, tax or other professional services. If legal, accounting, tax or other expert assistance is required, the services of a competent professional should be obtained.

This special report is part of an ongoing series from Wolters Kluwer focusing on tax and business developments, legislation and government relief efforts and other COVID-19-related activities. If you have questions, concerns or need additional insight on your situation, you can reach out to author and sales and use tax expert, Mark Friedlich at mark.friedlich@wolterskluwer.com.

COVID-19 (Coronavirus) Resources for Tax & Accounting Professionals

Wolters Kluwer is right by your side to help you stay up to date with tax and compliance changes and support your ability to work remotely. Please visit our visit our webpage for more resources.

AUTHOR

Mark Friedlich

Mark Friedlich, the renowned tax expert, is the Senior Principal of Global and U.S. Tax Practice at Wolters Kluwer Tax & Accounting. Mark has been a consistent thought leader in the tax community and advisor to government taxing authorities and businesses. Mark is a retired PwC Managing Tax Partner. He is a member of both the IRS Advisory Council and U.S. Senate Finance Committee’s Chief Tax Counsel’s Advisory Board, and advisor to 12 state taxing authorities, and the HMRC in the UK. Mark was recently recognized as one of Accounting Today’s Top 100 Most Influential Tax and Accounting Experts. Mark is a featured speaker at many conferences in the U.S. and around the world. His impressive resume also includes Vice President and Publisher, Director, Adjunct Tax Professor, prolific author, writer and blogger including several books and has a “Voices” column in Accounting Today. Mark has been an “influencer” as a key member of the American Bar Association’s Tax Section and AICPA’s Tax Executive Board. He is also a board member of various professional associations.

All stories by: Mark Friedlich