Coronavirus Cuts Back Sales Tax Changes

Governor Gary Herbert of Utah is rejecting a proposal to roll back the state’s sales tax exemption for railroad fuel. Maryland is delaying planned sales tax increases. And while Tennessee went ahead and passed a sales tax law change, Missouri is holding off on theirs.

Since the Wayfair decision back in 2018, states have implemented a flurry of new sales tax laws. Some states have passed laws and had to go back and change them. Others are seeing their laws challenged in the courts.

It’s been lively — even livelier than usual — in the realm of sales tax.

But the coronavirus pandemic has slowed that down. Like the examples given above, many states just aren’t in the mood to keep working on sales tax regulations.

Priorities

In many cases, legislators are just too busy coping with the pandemic in their states to pay attention to less urgent matters. Sales tax filing deadlines are being pushed out, or penalties for late payments are being waived.

Legislators with sales taxes on their minds are in many cases focusing on fears that the revenue from sales taxes will be dangerously low. For one thing, nonessential businesses have closed in many states. Those that are open may be seeing far fewer customers than usual as people shelter at home. Restaurants in many states are restricted to drive through and delivery.

And with 6.6 million new unemployment compensation filings, the U.S. is seeing a conservative attitude toward spending.

The combination of these factors has everyone predicting lower sales tax revenue. Hotels, retail, restaurants, and personal services have all dried up in many parts of the nation.

Is spending down?

Certainly, people sheltering at home are spending less on entertainment and spending less in local stores.

Yet states that are collecting sales tax from remote sellers may be able to benefit from increased online sales. E-commerce retailers have seen a 1,200% increase in online account registrations. Online shopping has increased by 25% in the past month. There has been a 62% rise in online orders for store pickup.

Specific products are seeing even larger jumps:

  • Hand sanitizer, masks, and other protective gear has seen an increase of 807%.
  • Toilet paper sales are up by 231%.
  • Over the counter medication sales have jumped 217%.
  • Non-perishable food sales are up by 87%.

Clothing sales are way down — but clothing is not always taxable in ever state. Food items, also, may be non-taxable or may have different sales tax rates. Sales of digital products are also higher, but again they may or may not be taxable.

Many analysts suggest that the pandemic has just fast-forwarded the changes in consumer behavior that were already on the way. Online shopping has increased to levels predicted for 2025. “Brick and click” store pickups are increasing wildly. Older generations are discovering Instacart and younger generations are stocking up… often for the first time. Consumer behavior may change, even after the pandemic ends.

It will be difficult, considering all these factors, for states to predict the amount of sales tax revenue they’ll be able to collect from remote sellers.

Legislators health

Many states have also shut down legislative sessions to avoid having gatherings and thereby spreading the virus faster. Some will shift to digital meetings, but some will just delay their sessions.

SalesTaxDataLINK can help. Outsource your sales tax compliance to us. We’ll be able to keep up with the changes and take sales tax concerns off your plate.

Latest Articles

Transaction Privilege Tax (AKA Sales Tax)

Transaction Privilege Tax (AKA Sales Tax)

When is a sales tax not a sales tax? When it's a transaction privilege tax. Looking back in history, we can see that the practice of collecting sales tax for online purchases had some public relations problems. Advocates pointed out that everyone was...

read more
Remote Sellers Sales Tax Holdout Florida May Jump In

Remote Sellers Sales Tax Holdout Florida May Jump In

The 2018 Wayfair decision from the Supreme Court allows states to collect sales tax from remote sellers with no physical presence in the state. Most states have already jumped on the bandwagon. Only two of the states that charge sales tax have not yet...

read more
Sales Tax Revenues Are Up

Sales Tax Revenues Are Up

Through most of 2020, states worried about their sales tax revenues. Headlines about mandatory closures of businesses forecast huge drops in state revenues, largely because of the loss of sales tax revenues from businesses that had to close. Retailers,...

read more