Expect Sales Tax Rates to Proliferate Post-Pandemic

As we come to the end of 2021, the fears of many state and local government brought about by the pandemic have lessened. Many regions were rattled as the economy shut down, and for good reason. Mike Bernard, the chief tax officer for transaction tax at Vertex, mentioned that besides property tax being 40% of these regions’ revenue, about a third of revenue comes from sales tax. While many residents were worried about purchasing the necessities and stretching their dollars, localities were finding these non-taxable purchases (food and medicine, for example) detrimental to their own budget and revenue. 

This immediate change in buying and spending habits caused states to have some pause and to use their funds from the American Rescue Plan Act to help keep them afloat. To continue regaining the funds lost from the pandemic, it can be expected that transaction taxes will increase as they are an easy and dependable source of income.

This elevation will take form in many ways including new taxes, an increase in rates, and those same rates potentially changing often

Vertex Vice President of Tax Research Bernadette Pinamont said, “Indirect tax teams still need to keep their eyes on several possible tax trends as all jurisdictions look to recover lost revenue and close COVID-related budget deficits.”

Because of these actions, Pinamont predicts that there will be an increase in audits which is common after an economic downturn to try and generate more income and also said the increased audits will likely be directed towards online merchants and marketplaces that continue to grow. 

As we all prepare for this next year, let’s keep our eye on these possible tax jumps and anticipate more difficulty calculating and remitting sales tax liabilities. It’s important to be prepared for multiple tax rates across various jurisdictions so you can be compliant regarding sales tax amounts to charge customers.

If you are a business that must collect sales tax and are needing assistance, we are here to help. Reach out to us at 310-534-5577 or contact@abandp.com to discuss your specific needs and we can determine a solution that is right for you!