Just as businesses were starting to wrap their arms around sales tax changes resulting from the Wayfair decision, states are throwing yet another curve ball at them. Inflation is impacting consumers across the country and many states are flush with cash due to hefty increases in sales tax collections since the Supreme Court’s Wayfair ruling. As a result, some states are making changes to sales tax policies to benefit consumers. The changes differ from state to state and are still evolving and creating new collection and compliance headaches for businesses.
In some instances, states are seeking to permanently end certain taxes. In others, they’re considering a “holiday,” a gradual phasing out or temporary relief.
Gas taxes: States including Connecticut, Georgia, Maryland, New York and Florida have announced suspensions or “holidays” from state gas tax for consumers – some of which have already expired and some haven’t yet started. There’s a lot of debate about just how much a gas tax cut actually helps consumers, especially when the federal gas tax is still in effect.
Groceries: With food costs rising rapidly and directly affecting the buying power of consumers, a reduction or elimination in state tax on groceries is expected to make a noticeable difference to the average consumer. Several states have or are in the process of implementing a short-term suspension of state sales tax or food or food ingredients. A notable change is in the state of Kansas which passed the “Axe the Food Tax” bill. The bill phases out sales taxes on groceries over the course of three years. In January 2025, the state will no longer impose a sales tax on groceries.
And of course, there are state sales tax holidays that have been occurring in many states each year. A full list of those and items that the holiday applies to can be found here (and is updated frequently). These range from sales tax holidays on school and computer supplies, to generators, air conditioners and even sports equipment.
Though there is a move afoot to reduce the sales tax burden in many states, some states are actually looking for ways to increase their sales tax collections. Our recent article on the Colorado Retail Delivery Fee is one example.
Whether the issue is increasing or decreasing sales taxes for consumers, if you’re a seller of goods, your compliance challenge continues to be more complex.
It’s important to note that you must still properly collect and report sales made during any suspension or holiday in sales tax collection. In an already confusing sales tax compliance world, collecting, remitting and reporting on sales tax has become a more onerous task, even if temporarily so. After the Wayfair ruling and before inflation crept in, sellers were already challenged with understanding and wading through compliance. Smith and Howard’s indirect tax team works with businesses and individuals across the country providing indirect tax compliance services. Contact a member of our team by selecting the Contact an Advisor button below.
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