2020 sales tax changes
1: Sales tax ushers in the new normal
We typically describe sales tax as unpredictable, but in many ways, 2019 turned out as expected. After the Supreme Court of the United States issued a sweeping decision in 2018 that allows states to impose tax obligations on businesses without a physical presence, the states saw the opportunity and ran with it. And run with it, they did. Economic nexus laws spread like wildfire.
State economic nexus laws: then and now
Today, a single webstore can potentially trigger tax obligations in 43 states — no matter where the business (or its employees, equipment, etc.) is located. Aside from the NOMAD states (New Hampshire, Oregon, Montana, Alaska, and Delaware), which have no general sales tax, only two states are holding out on issuing similar rules: Missouri and Florida.
What no one could have predicted was how the states would roll out their nexus laws. As a nation, the United States beats to its own drum, and so does its state tax authorities. Effective dates, exemptions, and small-seller exceptions vary from state to state, forcing sellers of all sizes and industries to navigate the maze of compliance. 2020 will be the year when the dust settles and businesses adapt to a new normal for sales tax compliance.
While economic nexus might be the headline for 2020, new laws affecting both marketplace sellers and marketplace facilitators will likely be the story. 2019 introduced a host of new laws impacting those who sell on Amazon, Etsy, and the like.
As of December 2019, 39 states (including Washington D.C.) have adopted laws requiring marketplace facilitators to collect and remit sales tax for their third-party sellers — and some marketplaces aren’t taking the news lying down. Tax-free shopping in the U.S. may run its course, but not without a fight from retail giants Amazon, Walmart, and others.
2020 might also be a year of international exploration for many ecommerce businesses. According to Accenture and AliResearch, cross-border ecommerce sales are forecast to reach $1 trillion by 2020. You can bet U.S. sellers are looking to enter the international market as quickly as possible, but expanding into new global markets brings — you guessed it — new tax obligations. According to the Global Natives study by Stripe, the most difficult factor in global expansion is dealing with too many taxes.
As they say, the devil is in the details, which this report aims to provide. 2020 sales tax changes highlights everything from major legislative changes in the big dogs, like New York and Texas, to wacky sales tax rules in other states in the U.S.
If we’ve learned anything over the years, it’s that change in sales tax is as constant as it is inevitable.
Sales tax by the numbers
Economic nexus laws spread throughout the U.S.
states have economic nexus laws
Marketplace laws became the norm
states (including D.C.) have marketplace facilitator sales tax laws
Cross-border transactions dominate the global market
By 2020, cross-border ecommerce could reach $1 trillion in sales