2020 sales tax changes
5: What’s technology doing about sales tax in 2020?
Businesses, especially ecommerce companies, are struggling to manage the rise in remote sales tax obligations brought on by South Dakota v. Wayfair, Inc. Fortunately, technology can help.
State programs lend a helping hand
The Supreme Court praised South Dakota for participating in the Streamlined Sales Tax (SST) program. As the name suggests, all 24 official SST member states have streamlined sales tax compliance for remote sellers. They have a uniform tax base, a central electronic registration system, and more. For some sellers, SST member states also subsidize the cost of using an SST Certified Service Provider (CSP) of sales tax software, like Avalara, for sales tax collection, remittance, and returns. In fact, this is perhaps the biggest perk of registering through the SST: Qualifying remote sellers can receive CSP services free of charge.
Will other states adopt SST in 2020?
Time will tell. There’s been such a positive response to the SST CSP program that some non-SST states are emulating it. In 2019, Pennsylvania developed its own CSP program to help remote sellers comply with the state’s economic nexus law. Their program took effect July 2019.
Connecticut is consulting with the SST Governing Board to develop a list of certified service providers that can facilitate sales tax collection and remittance. Illinois is currently hammering out the details of a CSP program. New Mexico is working to establish standards for the certification of CSPs. And Virginia’s new economic nexus and marketplace facilitator law calls upon the state to help remote retailers comply with their rules.
Will other non-SST states follow suit in 2020? They could. Pennsylvania’s newly established program might be the catalyst.
AI, big data and analytics, and cloud computing tackle sales tax
According to market intelligence provider International Data Company (IDC)*, technology providers are responding to the growing complexity of sales and use tax compliance. Many businesses are leveraging advanced technologies, like artificial intelligence (AI), big data and analytics, and cloud computing to streamline their operations. Sounds futuristic, but we’re likely to see the practical application of these technologies in the coming year.
Artificial intelligence (AI)
Companies have already started to use AI for such repetitive tasks as calculating the appropriate sales tax rate for 12,000+ U.S. tax jurisdictions. AI will also aid tax professionals in more accurately forecasting and conducting advanced risk/exposure analysis.
Big data and analytics
State tax departments are inundated with data, but culling insights from that data can be hard. More sophisticated data and analytics tools will allow tax professionals to identify opportunities and make informed tax decisions. According to IDC, big data and analytics will be a must-have for tax software end users.
Cloud software has transformed businesses on so many levels. Although tax compliance has been outpaced by other corporate functions in cloud adoption, it’s emerging. IDC expects the ubiquity of cloud tax software to grow in 2020 and beyond.
*IDC MarketScape: Global Tax Compliance Driving the Need for Cross-Border Technology,
doc# US44952318, April 2019