The 5 Biggest Stories in Indirect Tax Compliance 2018

Alex Forbes
December 27, 2018

2018 was a volatile year in indirect tax compliance for tax, finance and IT professionals worldwide.

With an increase in globalization and tax gaps surpassing tens of billions in some countries, it’s not surprising that one of the biggest challenges governments are addressing is revenue collection. Like enterprises, governments are creating new, technology-driven processes to improve transaction-level tax reporting accuracy and gain visibility into business transactions and taxes owed.

Throughout 2018, we tracked local and global regulatory trends that are creating a new world of modern digital tax, as well as the challenges these regulations are presenting to businesses.

Let’s take a look back at our most popular posts and the biggest changes in tax compliance in 2018 from a 1099, e-invoicing, sales and use tax, and VAT perspective:

Sales and use tax compliance

The South Dakota v. Wayfair ruling

With these words, the world of sales tax as we knew it was turned upside down:

Held: Because the physical presence rule of Quill is unsound and incorrect, Quill Corp. v. North Dakota, 504 U. S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753, are overruled.

The following quote from Sovos Director of Regulatory Analysis Chuck Maniace pretty much sums it up:

“We are officially in a new era of sales tax. What we have considered to be foundational principles that define where businesses must collect and remit sales tax, are now entirely out the window. States now have almost a blank slate on which to write, and businesses will face a wave of new rules for tax compliance.”

Learn more and get valuable resources to keep track of these sweeping changes.

e-Invoicing compliance

With one of the largest VAT gaps in the EU of €35 billion, Italy is the first EU country to introduce a clearance model. Few people will have failed to notice the extent of the ongoing VAT reform in Italy and its impact on businesses.

Italy Finalizes Expanded e-Invoicing Requirements

Italy will soon join Hungary in requiring real-time, transaction-level reporting. With the launch of the first phase (1 July 2018), Italy’s tax authority recently released new information, again, on its e-invoicing requirement extension.

Learn more and check out available resources, here.

VAT reporting

At the beginning of the year, we shared a post about six countries across Europe and Latin America facing significant changes in e-invoicing and/or VAT reporting, including Hungary, Italy, the U.K., Spain, Mexico, and Colombia.

Hungary VAT Reporting Is Here: Are You Ready?

In June, the Hungary VAT reporting requirement went into effect. The country’s approach is unlike most other electronic invoicing mandates found throughout the world, as it is based on invoice amount – not company size.

This change affected every company in Hungary that make business-to-business transactions.

Learn more and download our Hungary VAT Reporting eBook while you’re there to learn more about the country’s requirements.

1099 Tax reporting

The 1099-K reporting threshold changes enacted in Massachusetts and Vermont earlier this year have started to have repercussions for states, online businesses and companies doing tax reporting.

Lower 1099-K Reporting Thresholds Rake in Money for States, Surprise Businesses and Put Companies on Notice

Additionally, two trends have converged to create a nightmare for tax information reporting. First, the sharing economy has redefined work and taxation of wages. Second, the IRS has decided it needs to bridge the gap between revenues and taxes paid—a divide that the sharing economy has only made wider.

Check out our 1099 predictions for 2019 and download our 1099-MISC Nonemployee Compensation Reporting eBook for more details.

Beverage and alcohol tax compliance

Back in September, Sovos revealed data on the performance of the direct-to-consumer (DtC) winery shipping market through the first six months of 2018. Among the notable trends in the report were Napa County wine sales slowing but remaining steady, while sales of Oregon wines rose, and Rosé continued to build momentum after strong gains last year.

Sovos Announces 2018 Mid-Year Direct-to-Consumer Channel Data

Even if you’re not in the beverage and alcohol direct-to-consumer business, check out which wines have been the most popular this year before heading to your local liquor store or online retailer for New Year’s.

Take Action

In June, Sovos unveiled its S1 platform to prepare businesses for digital tax enforcement globally. See our full line of tax compliance solutions and let’s Solve Tax for Good.

Image courtesy of Robert Simmon and NOAA National Geophysical Data Center

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Alex Forbes

Alex Forbes is Senior Manager, Content Marketing, at Sovos. When not helping readers navigate their tax-related digital business transformation journeys, he enjoys day tripping around New England with his wife.
Share This Post

Tax Information Reporting United States
May 14, 2019
How to Prepare for 1099 Reporting Changes to Come in the Gig Economy

There has been a lot of attention paid to “gig” economy workers lately, and that includes some scrutiny by state and federal tax authorities. The growing impact to tax revenue as a result of under-reporting of income and minimal payments of self-employment taxes from this ‘new’ sector of American workers has not gone unnoticed. Academic […]

EMEA IPT
May 9, 2019
The Cost of Getting it Wrong – The Benefits of Getting it Right

Premium taxes shouldn’t be overlooked as pressure mounts for insurers to protect profit margins. The UK insurance market in recent years has achieved on average a combined ratio of 95%, meaning that for every £100 of premium income written, the insurer makes an underwriting profit of £5. If you then consider that the standard rate […]

Tax Information Reporting United States
May 6, 2019
Best Practices for Coping with the IRS Crackdown on 1099 Backup Withholding

Background Generally, under Internal Revenue Code 3406(a)(1)(A), when a payer of US source income fails to collect a US tax identification number (TIN) in the manner required for the type of payment being made, 24 percent backup withholding is applicable at time of payment. Filers are required to remit those amounts to the IRS and […]

E-Invoicing Compliance EMEA LATAM Sales & Use Tax United States VAT & Fiscal Reporting
May 6, 2019
Shielding SAP Central Finance Migrations from Tax Compliance Mandates

With more companies focusing on global integration, cross-border supply chains and expanding ecommerce, governments across the globe are introducing new ways to enforce tax rules and close their tax gaps. The evolving global regulatory environment produces unique tax determination and reporting challenges in the United States and additional VAT and e-invoicing compliance challenges around the […]

EMEA IPT
May 2, 2019
Italian Prepayments Can Be Painful

Some insurance premium tax regimes operate a kind of prepayment mechanism, whereby insurers are required to pay an amount to the tax authorities in anticipation of future tax liabilities.  This credit is then drawn down on or adjusted as and when actual tax liabilities crystallise.  Prepayment should not, therefore, represent an additional cost to insurance […]