As we come to the middle of 2021, the fears of many state and local government brought about by the pandemic have lessened.
Many regions were rattled as the economy shut down, and for good reason. Mike Bernard, the chief tax officer for transaction tax at Vertex, mentioned that besides property tax being 40% of these regions’ revenue, about a third of revenue comes from sales tax. While many residents were worried about purchasing the necessities and stretching their dollar, localities were finding these non-taxable purchases (food and medicine, for example) detrimental to their own budget and revenue.
This immediate change in buying and spending habits caused states to have some pause and to use their funds from the American Rescue Plan Act to help keep them afloat. To continue regaining the funds lost from the pandemic, it can be expected that transaction taxes will increase as they are an easy and dependable source of income.
This elevation will take form in many ways including new taxes, an increase in rates, and those same rates changing often. In conjunction with these changes, many smaller companies are converting to cloud-based programing to save them money in overhead required to store servers and pay workers to update them often.
Larger companies are slower to move to subscription based software to calculate sales tax on invoices due to the concern of security. Any information leaked from these larger companies can cause increased damage with their clients and can further harm themselves financially as word-of-mouth spreads quickly.
As we all prepare for this next year, let’s keep our eye on these possible tax jumps and anticipate more businesses reconfiguring their processes to save themselves money in overhead.
If you are a business that must collect sales tax and are needing assistance, we are here to help. Reach out to us at 310-534-5577 or firstname.lastname@example.org to discuss your specific needs and we can determine a solution that is right for you!