Complexity of sales and use tax continues to be a challenge for remote businesses
ATLANTA – June 22, 2022 – Global tax provider Sovos today announced that there are an estimated 800 sales tax bills under consideration by state legislators each month, highlighting the ongoing complexity of sales and use tax on the fourth anniversary of the South Dakota v. Wayfair decision. Sovos’ State of Sales and Use Tax Report highlights updates on regulatory trends, enforcement and technology as businesses continue to navigate sales tax and nexus issues. In addition, the report details the complexity of sales tax management within organizations and how to remain compliant as governments continue to digitize compliance to minimize the estimated $400 billion annual tax gap.
“State legislators and regulators are continuing to adjust sales tax laws and compliance requirements as a means of serving multiple policy objectives, including widening the tax base to generate additional revenue, enacting targeted exemptions to combat inflation and adopting simplifications aimed at leveling the playing field between in-state and remote sellers,” said Charles Maniace, vice president of regulatory analysis and design, Sovos. “The State of Sales and Use Tax Report will serve as an informative guide for organizations to understand the current regulatory environment for sales and use tax as they map out near and long-term compliance strategies.”
The top 3 trends in sales tax to monitor:
Based on Sovos’ State of Sales and Use Tax Report, below are the top three trends in sales tax:
- The number of sales tax bills under consideration continues to evolve: In any given month, state legislatures are considering an estimated 800 new bills that could be entered into law. With ever-evolving updates to sales tax rates and forms, businesses are struggling to keep pace
- More jurisdictions are implementing sales tax: The total number of jurisdictions within the U.S. grew to 12,472, a 3.4% jump compared to last year. This boost signals the increasing importance of sales tax on local coffers, which can make it more difficult for remote retailers to keep track of the varying nexus rules where their customers reside.
- Technology is replacing traditional paper-based reporting: More jurisdictions are implementing new technology to make reporting and remittance more efficient and accurate in an attempt to minimize the estimated $400 billion annual U.S. tax gap. Because compliance differs by jurisdiction, organizations that manually report are at a higher risk for non-compliance.
Impact of Halstead Bead v. Lewis on economic nexus
As the fourth anniversary of the Supreme Court’s historic ruling on South Dakota v. Wayfair approaches, one state – Louisiana – is drawing legal challenges due to its complex tax collection system. Specifically, remote retailer Halstead Bead is arguing that the requirement for ecommerce businesses to register, collect and report online sales tax for 64 parishes with differing tax rates is an undue burden. Depending on the outcome, this legal challenge can come up into question in other states as remote retailers continue to struggle to meet their sales and use tax obligations.
For more insights on Sovos’ State of Sales and Use Tax Report, visit www.sovos.com.
Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe and is owned by Hg and TA Associates. For more information visit http://www.sovos.com and follow us on LinkedIn and Twitter.