2020 sales tax changes
2: Sea change for state tax laws
By now, the impact of the Supreme Court of the United States South Dakota v. Wayfair, Inc. decision is widely known. Imposing sales tax obligations on out-of-state businesses is old news and the new norm. But even though most states have already issued their new rules, sellers across the U.S. still have their work cut out for them: Figuring out their liabilities and rebuilding their tax strategies for states they never accounted for is no small feat.
States have always been fiercely independent when it comes to their laws and sales tax is no exception. Here’s a look at what made headlines in 2019 and what to expect in the coming year.
The Sunshine State might finally enact economic nexus
If a bill recently filed with the Florida Legislature gets any traction, Florida may become the 44th state to adopt economic nexus. Senator Joe Gruters asserts this wouldn’t be a new tax: “The tax is owed. This makes it convenient for consumers.”
Florida’s threshold would be similar to the threshold in many other states:
200 or more retail sales of tangible personal property to be delivered into Florida in the previous calendar year; or
Any number of retail sales of tangible personal property to be delivered into Florida in an amount exceeding $100,000 in the previous calendar year
So, will Florida do it? That’s the question everyone who sells into Florida wants to know. It’s hard to imagine Florida lawmakers not pushing a remote sales tax bill through eventually, given that every other state with a sales tax has already done so (except Missouri, of course). If the measure passes as written, economic nexus would take effect in Florida on July 1, 2020.
Will Missouri Show Me economic nexus in 2020?
There’s no shortage of irony that a state that prides itself on straightforward pragmatism has one of the most complex tax systems. There are approximately 2,200 local tax jurisdictions in the Show Me State and each one can have multiple local rates; local sales tax rates and local use tax rates don’t always match; there are special rates for food (sales tax and use tax), domestic utilities, and more. No wonder the Missouri Legislature stepped in, requiring the Missouri Department of Revenue to make it easier to find local sales and use tax rates.
Before the state can require remote sellers to collect and remit sales and use tax, Missouri will likely need to address this complexity. Nonetheless, we wouldn’t be surprised if Missouri issues a bill in 2020.
The Lone Star State lends a hand to out-of-state sellers
Second only to California in population, Texas is an enormous market for many businesses. Mercifully, the state eased into establishing economic nexus for out-of-state sellers.
Within a week of the Wayfair ruling, Texas Comptroller of Public Accounts Glenn Hegar said his department was working to implement the principles of the decision: “We’re going to make sure we do this carefully, deliberately and with ample input from the public, the Legislature, and the business community.”
That’s exactly what happened. Remote sellers are now required to collect and remit Texas sales tax if they have more than $500,000 in sales of taxable and exempt products and services in the state.
To further ease the burden on out-of-state sellers, Texas created an optional single local use tax rate: Businesses can apply to collect a single local tax rate on all Texas transactions rather than the actual rate in effect in each location. Since there are approximately 1,500 different tax jurisdictions in Texas, each with its own rate, this option could be extremely helpful for businesses with customers statewide.
Texas also applies economic nexus to franchise tax. In this, Texas is the outlier, but it may also be a harbinger: Hawaii will enforce an economic nexus standard for income tax for taxable years after December 31, 2019; Pennsylvania is enforcing economic nexus for corporate net income tax as of January 1, 2020; Washington applies economic nexus to B&O tax; and at least two cities apply economic nexus to certain local taxes.
In other economic nexus news:
Louisiana is set to enforce economic nexus by July 1, 2020. Learn more.
Georgia lowers remote seller sales threshold and eliminates reporting requirement beginning January 2020. Learn more.
For a comprehensive breakdown of all economic nexus laws, check out our seller's guide to nexus laws and sales tax collection requirements.
Will states finally accept bitcoin?
Most states don’t accept bitcoin as a form of payment. In fact, most state tax departments currently don’t provide much guidance on cryptocurrency, though that’s gradually changing: New Jersey, Ohio, and Washington have all published guidelines on how sales tax and other tax applies to virtual currency transactions.
Ohio is the outlier. In November 2018, the Ohio Department of Taxation became the first — and to date only — state to accept cryptocurrency for tax payments. However, in October 2019, the new state treasurer suspended the state’s portal for accepting cryptocurrency tax payments.
The Buckeye State will likely accept bitcoin tax payments once again. And if all goes well, more states are likely to embrace virtual currency.
Rate changes and more rate changes …
Rate changes are as inevitable as tax itself. Fortunately, our much-anticipated state sales tax rate resource is now live. There you’ll find up-to-date state and local rate information, as well as Avalara’s comprehensive state guides, which detail everything you’d want to know (and a few things you didn’t) about sales tax in every state.