An estimated 800 sales tax bills are under consideration by state legislators each month, according to a new report, as lawmakers grapple with the complexity of sales and use tax four years after the Supreme Court handed down the South Dakota v. Wayfair decision.
The report, released Wednesday by the tax compliance software company Sovos, found that businesses are struggling to keep pace with all the changes and proposed changes. At the same time, more jurisdictions are implementing sales tax. The total number of jurisdictions in the U.S. grew to 12,472 in 2022, a 3.4% jump compared to 2021.
More jurisdictions are turning to technology to make reporting and remittance more efficient and accurate in an attempt to minimize the estimated $400 billion annual federal tax gap. But because compliance differs by jurisdiction, organizations that manually report are at a higher risk for noncompliance. One state — Louisiana — is encountering legal challenges thanks to its complex tax collection system. The online retailer Halstead Bead is arguing that the requirement for e-commerce businesses to register, collect and report online sales tax for 64 parishes with differing tax rates is an undue burden. Other states may see similar legal challenges.
“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 of Sovos, in a statement. “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.”
He recently told Accounting Today about some of the trends he has been seeing on the sales and use tax front in different states in the wake of the Wayfair decision (see story). “There is a push and pull going on right now where we see some states attempting to expand their sales tax base,” said Maniace. “And they expand it by including things like digital products.”