States are seeing double digit growth in sales tax revenue, a trend that has been fueled in part by changes in consumer spending during the pandemic. 42 states reported higher sales tax revenue from April–September versus the same period in 2020. What’s more, an incredible 27 states reported annual growth of over 20% during that period.
According to a new report by the National Association of State Budget Officers, median sales tax revenue grew by more than 9% in fiscal 2021, which ended June 30. Many states reported double-digit growth.
For one, the pandemic curtailed spending on services — most of which aren’t taxed. Instead, many Americans redirected their spending on stuff like new furniture, gardening supplies or materials for home improvement projects, which are taxed. Two, government stimulus checks pumped more spending money into the economy for those who weren’t financially hurt by the pandemic. And three, almost all states that collect a sales tax are now doing so for online sales thanks to a 2018 Supreme Court decision.
Given these trends, consumers and retailers should know what’s on the horizon for 2022. Here are some of the top sales tax issues to watch in the coming year.
The recent U.S. Supreme Court ruling in South Dakota v. Wayfair overturning the long-held Quill decision will dramatically change the landscape for online sellers when it comes to sales tax.
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