States Are Responding To Revenue Loss

At an ever-increasing rate, we are seeing states respond to what is quickly becoming an expanding economic crisis

The pandemic has created a huge revenue shortfall in many states due to the lower amounts of sales and income already collected and/or projected to be collected. Many experts have speculated that because of the loss of revenue, states are likely to take action designed to expand tax revenues and decrease costs. We believe it likely states will tax more services and more digital products. We believe we will see the states who have not yet introduced economic nexus or marketplace collection statutes to do so. Perhaps we may even see revisions to some of the existing statutes. We also believe states will begin to reduce or eliminate exemptions and many states will increase their discovery, auditing, and collection efforts.

We are already seeing states start to respond to their loss of revenue

For instance, in Wyoming in response to the revenue shortfalls, Governor Mark Gordon has instructed state agencies to immediately take action to further reduce spending and prepare for deeper cuts in the coming months. 

In Florida, as revenue plummets and lawmakers are urged to address Wayfair, a taxpayer research group has called on Florida lawmakers to adopt remote seller legislation, saying the need to address the issue is urgent in light of revenue collections being 878 million dollars below expected. Florida and Missouri are the two remaining sales tax states that have not adopted remote seller regulation. It is very likely that we will see most states respond in a similar way. 

Revenue collections in every state are millions to hundreds of millions below expected estimates and as states are hurting for income and remain cognizant of their own residents and local business they are likely to look towards digital services for income and sales and use tax to help make up for these losses. We may see states lower their thresholds where possible and have already seen states like Texas ramp up their enforcement offices. 

This all comes shortly after many states have announced extensions on their income and sales and use tax

We see why this may have been confusing for some and hope these extensions were used to help adjust to your possible new work from home environment. If you want to hear or learn more about states manipulating their tax policy for this reason please listen to this podcast episode. 

In conclusion, now more than ever is a time to take the time to understand your own economic nexus footprint

Expect to see states become more aggressive, lower thresholds where possible, and work to find additional revenue from out-of-state sellers. If you have questions about our services, please reach out. We offer consultations, research projects, registrations, de-registrations, and returns. You can also attend one of our many webinars to learn more about SUT and remote seller sales tax or check out the many free resources available on our website.

By: Ellie Moffat

This blog is intended for educational purposes and not as tax advice. Tax policies and procedures change frequently, so specific information, such as thresholds, rates, etc. included in this blog may have changed since it was originally published. Please request a consultation for more in-depth information.