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What to Expect From Sales Tax in 2020
Stay on top of the latest e-commerce and marketplace trends.
Having a strategy for sales tax compliance means knowing what factors and developments could play a role in how you approach sales tax. For example, businesses need to be aware of new legislation and evolving best practices that impact them.
While 2020 is in full swing, it is still early enough in the year to get a jump on things to come. Let’s look ahead to the rest of 2020 and what to expect from the sales tax landscape.
How COVID-19 Affects Sales Tax
As we look ahead to the rest of 2020, the economic disruption caused by the COVID-19 pandemic cannot be ignored. In March alone, the effects have been significant and remote sellers stand to be impacted in several different ways. While much remains to be seen as the world continues to manage this public health crisis, there are two long-term implications businesses should start thinking about:
- States moving filing deadlines: Many states, including California, have already taken action to move back filing dates, as well as provide sales tax relief in other ways. As difficult as it may be, it is important to stay on top of developments in states where you hold nexus. This blog can help you do that more easily.
- States raising tax rates: The economic losses caused by the outbreak have required large stimulus packages to prop up households and businesses. The price tag at the end of it all may force states to increase their rates to help pay for the relief afforded by emergency legislation.
New Laws to Consider
There was a surge of sales tax-related legislation in the wake of the 2018 Wayfair decision, which cleared the way for states to collect sales tax from remote sellers. While that legislative activity has quieted down some, there are still new laws in development that would establish economic nexus for remote sellers in states without such laws.
Currently, of the 50 states, only five do not collect statewide sales tax. Of the remaining 45, just two have not passed new legislation related to remote sellers. However, those two states are working toward such action:
- Missouri: The Show-Me State’s Legislature is trying a new push after failing to come to an agreement in its last term. State lawmakers filed a package of bills that would impose a tax on vendors with one-year cumulative gross receipts of at least $100,000 from Missouri sales. However, as of January 2020, none of the bills have even been heard by a State Senate committee.
- Florida: Despite having a huge state economy, Florida is playing catch-up with drafting and implementing remote seller laws. According to KPMG, two bills — introduced separately in the state’s Senate and House — have been pre-filed. They would impose a sales and use tax collection obligation on remote sellers with more than $100,000 in sales or 200 or more retail transactions of tangible personal property.
Several states that previously addressed remote sellers are looking to refine and clarify their existing laws. These efforts warrant the attention of businesses selling online, too. For example, Illinois adopted a law that cleaned up technical flaws, like expanding the definition of remote sellers to include those who sell through marketplace facilitators.
In fact, the new hotbed of legislative activity is focused marketplace facilitators, as more states (including Missouri and Florida) write laws regarding sales tax and marketplaces.
Spotlight on Multichannel
Selling through multiple channels has largely become the norm for modern businesses. Yet, as companies continue to enhance and expand their multichannel strategy, they will also need to address the challenges of marshalling compliance across divergent channels.
This is an especially important takeaway for businesses that have more exposure to sales tax, including those that:
- Have more nexus states;
- Generate higher revenue (which leads to increased potential for audits);
- Have a high SKU velocity because they sell more products; and
- Are international and have to deal with cross-border sales and regulations.
A comprehensive strategy for compliance across multiple channels hinges in large part on platform functionality. To ensure compliance, sellers need a sales tax solution that:
- Is accurate: The more you sell, the more risk you are exposed to. Roof-top accuracy is a must-have to support accurate calculations.
- Is high-performing: You need to be equipped to handle demand spikes and high order volumes without it negatively impacting the customer experience or conversions.
- Is data-driven: There is no substitute for in-depth reporting and properly archived data. The more detail you have, the better.
- Is easy to integrate: You do not have downtime to spare, so be sure your solution offers a seamless integration.
Ready to Automate Sales Tax Compliance?
Businesses need a sales tax solution they can trust will keep them on top of compliance in 2020 and beyond. Considering how fast things are moving today, companies can use all the help they can get with compliance.
If you are interested in taking the next steps toward automating your sales tax obligations with a high-performance solution, contact TaxJar today.
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