Change is afoot as we come to the halfway mark of 2021. As COVID-19 relaxes its stranglehold on the United States, states are considering how tax policies can be adjusted to help mitigate the worst effects of future crises. Across the Atlantic, the European Union is preparing to launch a sweeping e-commerce tax package to reduce tax evasion and level the playing field for local businesses.
States reopen and reconsider COVID tax relief policies
The effectiveness of COVID-19 vaccines is allowing even the most cautious states to reopen:
As businesses put an end to work-from-home orders, states are rescinding certain COVID-19 tax relief measures. For example,
States examine benefits of broadening the tax base
With business largely back to normal and Americans eagerly hitting the road, lawmakers and tax officials throughout the country are considering how different tax strategies could help minimize the negative effects of any future events.
Broadening the sales tax base is another option, in Vermont and in other states. For example, the
Nonetheless, similar efforts in other states may prove more successful as economic conditions improve. Indeed
Taxing other digital products and services, especially streamed content, is under consideration in Kansas, Wyoming, and several other states. Meanwhile, Colorado, Georgia, and Maryland are among the states that recently opted to apply sales and use tax to certain digital products. This should come as no surprise. When people couldn’t go to concerts, movies, shows, or brick-and-mortar stores — or even visit with family and friends — consumption of digital goods and streamed content surged. States that taxed those revenue sources faired better than those that didn’t.
The same holds true for the states that had economic nexus and marketplace facilitator laws in place.
Final holdouts pass remote sales tax bills
Ecommerce has comprised an ever-growing portion of retail sales since its inception two-and-a-half decades ago, but its use exploded during the pandemic. Though sales through all other channels declined when the coronavirus confined us to our homes in 2020,
The economic impact of the pandemic on sales and use tax collections likely contributed to the relative ease with which Florida passed an economic nexus and marketplace facilitator law this year. The Sunshine State will start taxing remote sales and requiring marketplace facilitators to collect and remit half on behalf of third-party sellers on July 1, 2021. If Missouri Governor Mike Parson decides to sign Senate Bill 153 into law, the Show-Me State will do the same starting 2023.
Florida and Missouri aside, states have been remarkably quick to respond to the Supreme Court of the United States decision on South Dakota v. Wayfair, Inc. Just
Europe levels the playing field
American states aren’t alone in amending their laws to account for e-commerce and marketplace sales. To help level the playing field between local brick-and-mortar and remote online businesses, the
These changes should also help reduce tax evasion, which is rampant in Europe.
U.S. to crack down on tax evasion
The U.S. has a different plan to crack down on tax evasion.
Whether new zeal for tax audits trickles down to the state level remains to be seen. It could depend in part on what the IRS finds if it undertakes this plan.