2018 brought us a transformative US Supreme Court decision. Then came 2020 with the global spread of the COVID-19 pandemic. What will 2022 achieve?
The fallout from these two events will likely continue to shape operating conditions as well as tax compliance issues for US companies.
Continuing complications of COVID
First, let’s look at the ongoing effects of the pandemic. About 24% of US consumer spending in the first half of 2021 It was handled online As consumers continue to avoid personal purchases. Business researchers estimate that the pandemic has accelerated the growth of e-commerce By nearly five years.
Companies have also faced disruptions in the global supply chain, which is the omicron variable It might get worse. China has Imposing quarantine requirements on ships Arrival at its ports, delay delivery times. The shortage of drivers and dock workers continued Ships parked at sea In US ports, while “The Great Resignation” It means that products delivered to stores are not always stored on the shelves. Companies in countries grappling with the coronavirus booms have closed factories and distribution networks, while consumers in countries less affected by the virus at the moment continue to place significant new orders, prompting US retailers and manufacturers to seek alternative suppliers for the products and parts they need.
because of all this Shipping costs have increased Last year, companies were so Forced to pay higher wages To attract workers, resulting in inflation.
Business has shifted in response to all of this. A survey by Oregon-based Umpqua Bank found that 96% of medium-sized businesses and 65% of small businesses Somehow changed in response to COVID-19. This can mean everything from a new company vision to new products, staffing adjustments, and supply chain adjustments.
All of this has implications for the company’s sales and use tax compliance:
new products? Are these new SKUs exempt or taxable, and if taxable, at what rate?
New suppliers? Are all resale or exemption certificates valid and up-to-date?
More refunds for online sales? Do sales and use tax returns need to be adjusted?
New business through dropshipping? Who is responsible for any tax owed?
When much of the United States closed in March 2020, federal, state, and local governments stepped forward A suite of programs to support affected businesses. These relief measures have completed their course and will be gone.
One common step taken by state and local governments has been to give businesses more time to file and/or pay their tax bills. For the most part, these deposit and pay extensions have expired, and companies are responsible for all tax revenue collected.
Some state (and local) governments have also eased their pandemic tax burden by not enforcing some interconnection rules. (If you need a refresher on the nexus, see the Individual country guide.) For example, when companies enforced work-from-home mandates early in the pandemic, many of them found themselves with a new physical bond in the states where their employees live. Many states have chosen not to enforce normal bonding rules in this case.
But often this was just a temporary policy. For example, as of July 1, 2021, out-of-state businesses with employees from home in Pennsylvania There may be tax obligations in Pennsylvania. Likewise, Indiana Let her looser policy expire On June 30, 2021 and Massachusetts Resumed enforcement of pre-pandemic interconnection rules On September 16, 2021.
companies that Selling through Market Facilitators – such as Alibaba, Amazon, eBay, or Walmart – will also be affected by laws in all states that impose sales tax that require a market facilitator to collect and remit sales tax on All Sales via their platforms.
And a growing number of governments – in United States of America And worldwide Requires electronic invoicing, digital filing or reporting. This gives them insight into sales data, which can be used to target enforcement activity.
Some states began enforcing the new Economic Association rules within days of the 2018 Supreme Court ruling in South Dakota v. Wayfair, Inc. (Click here to get Discuss this ruling and its importance.) Latest states and territories with sales tax laws that have been absorbed by adopting economic interdependence rules during 2021:
Puerto Rico He began imposing the economic association on January 1st.
Florida The Economic Association enacted on April 20 and started requiring some out-of-state sellers to register as of July 1
kansas Lawmakers enacted the Small Sellers Economic Relationship Act, which went into effect on July 1. Which Selling in the country will establish the relationship to a remote supplier.)
finally, Missouri On June 30, he enacted a law requiring out-of-state sellers to collect and remit sales tax if they had at least $100,000 in total cumulative revenue from the sale of tangible personal property. It takes effect – across the astonishingly complex state network of more than 2000 overlapping local tax district On January 1, 2023.
In addition, Alabama, Alaska, Colorado, and Louisiana allow citizens to have full domicile rule, which means they can create their own sales tax rates, use and some tax submission rules. In Louisiana, for example, remote retailers who have an economic connection You must register and file with the state And also With each of the state’s 64 parishes where they make sales. (Adding to the complexity, municipalities and counties can set their own tax rates, so rates often vary within the parish.)
Chicago, which has self-governing status within Illinois, has established its own standard of economic connectivity. Beginning July 1, 2021, businesses without a physical presence in Chicago will be liable for certain city taxes if they are. Meet or exceed $100,000 in revenue city clients.
More information about changes to US tax regulations can be found at Tax Office Avalara, which is a major source of information on transaction taxes. full Avalara 2022 tax changes The report is available at avalara.com.