As 2023 comes to an end, lets recap a few important sales tax changes and offer insight into what taxpayers can expect for 2024:
· Economic Nexus Transaction Counts – Initially, more than half of the states adopting economic nexus thresholds included a transaction count element as part of the threshold, meaning that a remote seller would be deemed to have sales tax nexus with a state if sales exceeded either the revenue threshold or the transaction count threshold. Not only are the transaction counts arbitrary and more burdensome to track for remote sellers, but they have an outsized impact on small businesses and sellers with high volume / low price point sales per transaction. For example, a business with an average sale of $20 can exceed a state’s 200 transaction threshold with only $4,000 in sales. This point has been made and observed by The General Accounting Office’s November 2022 “Report to Congressional Requesters, Remote Sales Tax, Federal Legislation Could Resolve Some Uncertainties and Improve Overall System”. As of August 2023, Louisiana became the latest in a growing number of states that have dropped the transaction count from their sales tax economic nexus threshold. South Dakota dropped its transaction count effective July 2023, in addition to 8 other states that had previously adopted a transaction count as part of their nexus threshold (CA, CO, IA, ME, MA, ND, WA, WI). You can learn more about both measures in the linked Economic Nexus chart on our website. The Streamlined Sales Tax (SST) Governing Board, and its State and Local Advisory Council also seek to remove the transaction count component from SST states, as a best practice.