Post Pandemic Effects: A Preview of the Mid-Year Sales Tax Rates and Rules Changes

The post-pandemic state of the United States' sales tax has appeared into a clearer picture, and it's looking (surprisingly) brighter, yet (predictably) more complicated.

Around $350 billion goes towards helping most states to manage revenue shortfalls triggered by the COVID-19 last year. (Vertex Mid-Year 2021 Sales Tax Rates and Rules Report)

With help from the American Rescue Plan Act of 2021, states are beginning to focus on stabilizing their budgets.

As identified last year, there is a steady stream of new district sales taxes materializing.



Our mid-year sales tax report includes information generated by collecting data from cities, districts, counties, and states as of May 31. This information resembles the corporate tax groups as they track them, including many other factors like moving to cloud technologies, post-Wayfair changes, etc.

Mid-Year Report Summry

1. New district taxes continue to increase:

In 2020, the number of new district taxes (177) was the second-highest in the last ten years. One hundred twenty-six new district taxes have been imposed as of May 31, 2021. If current trends continue, the number of new district taxes in 2021 will set a new high.

2. Districts are also revising tax rates more often

the number of sales tax adjustments at the district level has gone up significantly of 2020 district tax reforms through May 31. While the majority of the 2021 district tax adjustments are reductions, they contribute to the complexity of tax management.

3. Average rates continue to rise

Despite the reductions in district tax rates, the average district tax rate, as well as the average county and local sales tax rates, keeps climbing. Through May 31, the current total sales tax rate for 2021 is 10.14 percent, a 10-year high.

Since 2019, no states have changed their sales tax rates. Thus the average state sales tax value remains at 5.63 %. Most States were able to withstand the worldwide pandemic's economic and financial problems. However, a few states whose revenues are primarily on taxes collected by energy, transportation, tourist industry, and other hard-hit industries are experiencing serious budget deficits that must be handled.

Indirect tax teams should also keep an eye on continuing post-Wayfair sales tax revisions and related auditing operations. To cope with current sale tax collection and remittance requirements on their transactions, we've witnessed international in-bound merchants adopt sales tax technology solutions and/or start to sell via marketplaces.

Marketplaces and online merchants in Europe have a rather short time to prepare for upcoming VAT e-commerce legislation, which is due to take action on July 1, 2021, in the European Union (EU).

cloud based tax solutions are on rise

We're also keeping an eye on a rise in awareness in cloud-based tax technology, particularly among small and medium business markets that are becoming subject to sales taxes for the first time.

These cloud based tax solutions are appealing because of:

• Ease of deployment
• Minimal initial capital investment

The software vendors in the market constantly update the software to reflect the most up-to-date sales tax regulations and rates.

Contact us today, at Cartier CPA's our goal is to provide clients with the highest level of respect and quality of service.