Like its predecessor, 2020 promises to be an exciting year for sales tax. There will likely be new collection requirements for remote sellers and marketplaces in several states, as well as new attempts by states to facilitate remote sales tax collection.
Fallout from Wayfair Continues
A year and a half ago, the Supreme Court of the United States effectively granted states the authority to tax remote sales in its decision on South Dakota v. Wayfair, Inc. (June 21, 2018). Today, 43 of the 45 states with a general sales tax enforce economic nexus, meaning they require out-of-state sellers with a certain amount of sales in the state to collect and remit sales tax. Most began enforcing economic nexus in 2019.
The two holdouts, Florida and Missouri, will likely follow suit in 2020: Both have economic nexus legislation drafted and ready for their upcoming legislative sessions. Yet despite there being widespread support for taxing remote sales among the state lawmakers, each state faces hurdles.
In fact, localities in Alaska may beat them to it. Although there’s no statewide sales tax in America’s Last Frontier, more than 100 local governments levy a local sales tax. The Alaska Municipal League has a plan for them to work together to require certain out-of-state sellers to collect and remit sales tax.
New Collection Requirements for Marketplaces
Even as states impose collection obligations on remote sellers, they’re working to pass some of that responsibility on to the marketplaces that facilitate many online sales. More than 38 states have adopted marketplace facilitator laws requiring marketplaces to collect and remit the tax due on third-party sales. Expect other states to do the same in 2020.
Efforts to Simplify Sales Tax Compliance
A growing number of states want to simplify sales tax compliance for remote sellers. To that end, they may compensate certified service providers (CSP) — like Avalara — for providing sales tax software and services for certain out-of-state sellers. More will likely explore this option in the year to come.
These are just some of the sales tax changes you can expect to encounter in 2020. To learn more, check out this 2020 sales tax changes report.