How States Are Handling Revenue Short Falls

Seemingly every day we hear of states announcing devastating revenue shortfalls, and in turn budget cuts, changes in taxability, lowering economic thresholds, and anything that will help them make up for their losses and take care of their residents and businesses.

We all know that this is in large due to the overall impact of COVID-19. So just what have we seen? Where should you be looking? And, how should you be reacting and preparing for these changes as an accounting professional or business owner? 

First, it is important to note that the information available can be hard to sort through.

Some states have yet to take action, but this can feel complicated. For instance, New York state department has stated, "Despite the financial drain of the COVID-19 emergency on the New York state's budget, the personal income tax rate reductions that began in 2018 under Chapter 60 will continue." This leads us to believe that New York will have to make up for its revenue shortfalls in other ways. Other states have done this by lowering thresholds, changing taxability, and increasing their audit enforcement teams. We know that New York revenue shortfalls are reported as 1.5 billion and they have also reported significant budget cuts but not nearly enough to make up for this loss. 

Tennessee has lowered its economic threshold from 500k to 100k in an effort to make up its revenue shortfall. With lower thresholds, more companies will be required to register and collect tax.

Over the next twelve months, we will be learning exactly what states are doing to make up these shortfalls. Sales Tax and More will keep you updated, so check back regularly or sign up for our mailing list below!

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.