New year, new tax rates (and other sales tax changes)

Though sales tax requirements can change at just about any time, most sales tax rate and product taxability changes take effect on the first day of a month or quarter, and the first day of a new year always brings a host of tax changes. Read on for a taste of the tax rate changes taking effect January 1, 2024, and other tax updates.

Alaska requires a license to ship alcohol directly to consumers starting January 1, 2024.

Florida has a new back-to-school sales tax holiday January 1–14, 2024.

Georgia starts taxing specified digital products as of January 1, 2024.

Kansas is lowering the sales and use tax rate on food from 4% to 2% starting January 1, 2024.

Oklahoma is eliminating the state franchise tax starting with the 2024 tax year.

Alabama changes

The Alabama Department of Revenue hasn’t announced any local sales or use tax rate changes for January 1, 2024, at least as of this writing. However, the 911 service charge is increasing effective January 1.

And remember: Alabama Tax Account Licenses for lodgings tax, rental tax, sales tax, sellers use tax, simplified sellers use tax, and utility gross receipts tax must be renewed before the end of 2023.

Alaska updates requirements for DTC shippers

Starting January 1, 2024, in-state and out-of-state beverage alcohol manufacturers must possess a Manufacturer Direct Shipment license in order to ship products directly to consumers (DTC) in The Last Frontier. This is a big change: Previously, beverage alcohol manufacturers could ship to Alaska consumers without a permit.

DTC permit holders need to ensure they don’t ship alcohol to dry areas, of which there are quite a few. Additional information about these changes, known as the Title 4 Rewrite, can be found in the state statutes and at the Alaska Alcohol and Marijuana Control Office. It’s important for affected businesses to understand how the Title 4 Rewrite applies to them.

At the local level, the city and borough of Juneau are changing the single item tax cap and the single service tax cap starting January 1, 2024. The single item and single service cap level is increasing to $14,300, meaning only the first $14,300 of the selling price of a single item or service is subject to city and borough sales tax.

Arizona local transaction privilege tax changes

There are a couple of local sales tax changes in Arizona. 

Dance, martial arts, and gymnastics studios that charge for dance, sports, athletic, or other health-related instruction in the city of Peoria are required to pay transaction privilege tax on those services starting January 1, 2024. 

Also on that date, the threshold for the Phoenix retail sales and use tax two-level tax rate structure is increasing from $11,631 to $13,886. See the city of Phoenix website for additional details.

Arkansas local sales and use tax rate changes

Approximately 17 sales tax changes take effect in Arkansas January 1, 2024. These include annexations (which change the boundaries of a local tax jurisdiction), new local taxes, and rate increases.

Businesses with an average monthly gross receipts tax liability of $5,000 or more for the preceding fiscal year (July 1 through June 30) will now be required to file and remit all gross receipts tax returns electronically starting January 1, 2024.

California local sales tax rate changes

The city of Goleta is increasing its total sales and use tax rate from 7.750 to 8.750. See the California Department of Tax and Fee Administration for a list of sales and use tax rates by city and county.

Starting January 1, 2024, manufacturers and distributors of certain beverages, including wine, are subject to new requirements set by the California Bottle Bill Act. 

Colorado local sales tax rate changes

There’s a sizable list of sales and use tax rate changes at the Colorado Department of Revenue. All take effect January 1, 2024.

Additionally, food for home consumption is becoming exempt from the city sales tax in Loveland as of January 1, 2024. And the Colorado Department of Revenue is taking over the administration of local taxes in the home-rule city of Carbondale.

Florida tax changes

Statewide tax rates on motor fuel and diesel fuel in Florida will increase on January 1, 2024, when several local communications services tax (CST) rates will also change.

There’s also a surtax rate change in Collier County. 

Georgia changes taxability of digital products

Specified digital products are subject to sales and use tax in Georgia as of January 1, 2024. The Georgia Department of Revenue’s List of Sales and Use Tax Exemptions provides a bit more information.

Hawaii GET changes

From January 1, 2024, to December 31, 2030, there will be a 0.5% surcharge on the 4% general excise tax (GET) rate in Maui County, Hawaii. It should be reported on Forms G-45 and G-49. According to the Hawaii Department of Taxation, taxpayers doing business in more than one county must also complete Form G-75 and attach it to Forms G-45 and G-49.

The county surcharge only applies to activities taxed at the 4% rate so doesn’t apply to wholesaling activities (taxed at 0.5%), insurance commissions (taxed at 0.15%), and other such transactions. 

Illinois local sales tax changes

The Illinois Department of Revenue has a list of sales tax changes taking effect in Illinois on January 1, 2024. Most of these are tax rate increases.

Iowa sales tax changes

There’s a new local option sales tax jurisdiction in Iowa as of January 1, along with five new hotel and motel tax jurisdictions and one hotel and motel tax rate change. See the Iowa Department of Revenue website for more details.

Additionally, a sales and use tax exemption for purchases of computer peripherals by certain entities ends on December 31, 2023. As a result, Iowa sales and use tax applies to the purchase of computers and computer peripherals by insurance companies, financial institutions, or commercial enterprises for use in processing or the storage of data or information starting January 1, 2024.

Indiana gas tax change

Gas tax rates typically change monthly in Indiana. For the month of January 2024, the gasoline use tax rate drops from the December rate of 18.6 cents per gallon to 16.7 cents per gallon.

Kansas sales tax changes

Several changes affecting local sales tax rates take effect in Kansas in January 2024. Sales tax return filing requirements for retailers are also changing: On and after January 1, 2024, a retailer who collects more than $1,000 but less than or equal to $5,000 in sales tax in any calendar year can file returns and remit the tax due annually (by January 25 of the following year). Previously, the threshold for annual returns was more than $400 but no more than $4,000 in a calendar year. 

But the big news in The Sunflower State? The Kansas state sales and use tax rate for sales of food and food ingredients items drops from 4% to 2% starting January 1, 2024.

Local tax rate changes in the Dakotas

Sales and use tax rates are changing in three North Dakota cities with local tax rate changes — Hunter, Landa, and Leeds — as of January 1, 2024. Fargo is changing its sales and use tax jurisdiction boundaries.

In South Dakota, municipal sales and use tax rates are increasing from 1% to 2% in Aurora, Hecla, and Lake City.

Louisiana parish tax rate changes

There’s a rate change in Morgan City as of January 1, 2024, as well as new parish sales and use tax rates in Jefferson Davis Parish, Richland Parish, Tensas Parish, and Vermilion Parish. See the Louisiana Association of Tax Administrators for more details.

Another change taking effect January 1 is that the Louisiana Uniform Local Sales Tax Board will move toward overseeing the state’s uniform local sales and use tax return and remittance system. This is a change that will take time. The new system must be up and running no later than January 1, 2026.

Michigan prepared fuel sales tax rates

As usually happens at the start of each month, Michigan is implementing new prepaid fuel sales tax rates for January 2024.

It’s also worth noting that 2023 Michigan sales tax licenses are no longer valid after December 31, 2023.

Minnesota tax rate changes

No general state or local sales tax rate changes in Minnesota have been announced for January 1, 2024. However, cigarette tax rates are changing as of that date.

Looking ahead, veterans with a total service-connected disability are exempt from Minnesota’s motor vehicle sales tax starting July 1, 2024.

Missouri local sales and use tax rate changes

Many tax rate changes will take effect in Missouri on January 1, 2024.

New Mexico gross receipts and compensating tax rate changes

Local tax rate changes are taking effect on January 1, 2024, in more than a dozen jurisdictions in New Mexico.

New York tax rate changes

Tax rates for motor fuel, highway diesel motor fuel, non-highway diesel motor fuel, and residual petroleum products are dropping a bit in New York state, as is the electric utility credit/reimbursement.

Ohio changes commercial activity tax (CAT)

For tax periods beginning on and after January 1, 2024, Ohio’s CAT annual minimum tax is eliminated, and the exclusion amount is increased from $1 million to $3 million. This means taxpayers with taxable gross receipts of $3 million or less per calendar year will no longer be subject to the CAT.

No counties in Ohio have sales and use tax rate changes set for January 2024.

Oklahoma tax changes

There are a handful of local sales tax rate changes in Oklahoma as of January 1, 2024.

Additionally, Oklahoma is eliminating the state franchise tax. Starting with tax year 2024, there will be no franchise tax filing requirement in Oklahoma.

Oregon tax changes

Oregon state fuel tax rates are increasing as of January 1, 2024.

Tennessee tax changes

Certain Tennessee exemption certificates are expiring at the end of 2023, and effective January 1, 2024, there’s a $50,000 standard excise tax deduction for tax years ending on or after December 31, 2024.

Texas sales tax changes

A number of city sales and use tax rates and combined area sales and use tax rates are changing in Texas as of January 1, 2024. There are also numerous annexations and disannexations, which impacts local sales and use tax requirements.

Washington tax changes

Close to 20 local sales and use tax rates in Washington state are changing on January 1, 2024. Certain lodging sales tax rates will also change, as will rates for motor vehicle sales or leases in some jurisdictions. Finally, more than 21 cities are increasing their boundaries via one or more annexations.

West Virginia sales tax rate changes

There’s at least one local sales tax rate change in West Virginia. Effective January 1, 2024, Middlebourne will impose a 1% municipal sales and use tax.

Wisconsin sales tax changes

The city of Milwaukee has a new 2% sales and use tax as of January 1, 2024, and the rate in Milwaukee County is increasing. 

It’s hard to keep up with changing tax rates and rules and requirements, especially if you do business in multiple states and manage tax manually. Automating sales tax calculation, collection, and filing helps ease the compliance burden.