Things change fast: Stay in the know with the Avalara Tax Changes 2022 Midyear Update

Sales tax waits for no one. This makes working in sales tax exciting because you often don’t know what issues will arise from day to day. It also makes sales tax compliance challenging for businesses, particularly small and midsize businesses whose employees often wear many hats.

For example, I recently opened my laptop to discover Virginia had eliminated its accelerated sales tax (AST) payment requirement for fiscal year 2022. We knew this was likely because repealing the prepayment was included in the state budget. However, Governor Glenn Youngkin didn’t sign the budget until June 21, 2022.

Prior to the repeal of the AST, Virginia required permit holders with at least $10 million in taxable sales and purchases in the immediately preceding calendar year to make a payment equal to 90% of their sales and use tax liability for the previous June. Businesses making the payment via electronic fund transfer had to submit it on or before June 30, while payments by any other method were due on or before June 25.

The Virginia Department of Taxation was quick to act after the governor put pen to paper on June 21. The following day it issued a tax bulletin explaining, “no AST payment is due in June 2022.” Unfortunately, that left little time for any business preparing to submit the prepayment in June 2022 to hit the brakes.

This is just one example of the kind of tax change that can happen at any time. There are many more.

Registered retailers that sell taxable goods for delivery by motor vehicle to locations in Colorado are grappling with a new retail delivery fee that took effect July 1, 2022. Though it’s a simple enough concept, businesses need to get a lot of factors right to be in compliance — and as of this writing, there are still a number of unanswered questions.

During a Colorado Department of Revenue stakeholder meeting on the retail delivery fee, a participant said they’d learned the 27-cent fee is subject to local sales tax in some home-rule jurisdictions. Ah, but which ones? The Colorado Department of Revenue representative said they will publish that information as it becomes available. The department also wasn’t sure whether retail deliveries made by the United States Postal Service would be subject to the fee. If you do make taxable sales for delivery into Colorado, stay tuned for more info.

Sales tax holidays have also been subject to even more change than usual this year.

New Jersey will offer its first sales tax holiday this summer, starting August 27, 2022. And on May 6, 2022, Florida Governor Ron DeSantis signed a bill establishing 10 sales tax holidays. The first, a sales tax holiday for children’s books, started May 14, 2022, and ends August 14, 2022. It overlaps with the 2022 back-to-school sales tax holiday, which could be confusing for retailers and consumers alike because some books that don’t qualify for the back-to-school sales tax holiday do qualify for the tax-free period for children’s books, and vice versa.

Puerto Rico also enacted a new sales tax holiday on May 6, 2022. According to the statute, the tax-free weekend for hurricane supplies is to start the last Friday in May unless the Secretary of Treasury provides alternative dates by May 1. Since the tax-free period wasn’t signed into law until May 6, it was widely assumed the 2022 sales tax holiday would start Friday, May 27. However, on May 25, 2022, the Secretary of Treasury pushed the tax-free period to the weekend of June 17, 2022.

If a state provides a sales tax holiday for clothing sold in-store or online, would it also provide a sales tax holiday for clothing sold in the metaverse? What if that clothing came with a matching shirt for the avatar’s real-life counterpart? These are some of the questions state lawmakers and tax authorities are going to have to start considering as more and more transactions move into virtual realms.

And these are just a few of the issues that have crossed my desk since the start of the year, when the Avalara Tax Changes 2022 report was released.

Keeping up with sales tax changes across 45 states, Puerto Rico, the District of Columbia, and parts of Alaska is a full-time job, and then some. Throw in international tax obligations and other transaction taxes and you can see why many businesses rely on third-party tax advisors and accounting partners to help keep them in compliance.

To follow key developments in business and tax compliance and to keep your finger on the pulse of tax changes, read the Avalara Tax Changes 2022 Midyear Update.

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