Tax & Budgets
States to Watch This Summer if You Care About Tax Policy
August 27, 2024 | Andrew Jones
With several states enacting economic nexus bills in just the last few weeks, there are currently 18 states that have passed laws or adopted regulations asserting nexus based on sales rather than physical presence. The bills have typically followed the South Dakota model of a requiring either $100,000 in annual revenue or 200 separate sales from the state.
Given the billions of dollars that are at stake for states, these 18 states will surely not be the last. Economic nexus bills allow states to raise new revenue without having to overcome the political hurdle of arguing for a rate increase or brand new levy. In fact, they can argue that these bills levy the playing field between in-state and out-of-state businesses. Some states will choose to invest the revenue from these laws into new state programs and others will seek to return it directly to taxpayers in the form of commensurate tax cuts, but in either
In addition, the Wayfair ruling also opens the door for states to begin requiring marketplaces or the sellers using those marketplaces to collect and remit sales taxes based on economic activity. Twelve states considered 30 bills that would impose a tax collection obligation on marketplaces during this year's legislative sessions and were enacted in Alabama, Iowa, Kentucky, Oklahoma, and, just this week, New Jersey.
Prior to the rise of economic nexus legislation across the country, states had been slowly working to push the boundaries of established physical nexus rules by requiring sellers who utilized in-state affiliates, agents, or services to collect the sales tax. These types of bills are unlikely to spring up in the future now that states have a more direct path to
Reporting Requirements
It's also possible that we'll see a few states continue to consider reporting requirement laws (i.e., measures that mandate that non-tax-collecting sellers notify all of their buyers about the buyer's responsibility to remit the use tax), especially with regard to sellers who are below the statutory thresholds to require collection. But these bills are also likely to wane as the states respond to Wayfair.
While states with economic nexus laws in place are preparing for
Now that state governments are empowered to collect taxes on remote sales, we should expect that most will do so over the next year. The pace will vary from state to state depending on its current
August 27, 2024 | Andrew Jones
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