As I mentioned in my preview, sales tax rates at the city level are on track to register the highest number of changes in more than 10 years. The vast majority of these modifications were sales tax rate increases. With more than two-thirds of the 150 city sales tax rate changes occurring in the second quarter, is it possible that a fair number of the changes were made in response to COVID-19’s damaging economic impacts?
Although cities have been active, all remains quiet on the state rate change front, for now. The fact that there weren’t any state sales tax changes from January through June 30 also may be related to COVID, given that many state legislatures postponed or suspended their sessions earlier this year during the pandemic’s initial spread. However, with state sales tax budget deficits as of June 30 now being reported out, will the second half of the year bring a different level of activity?
As always, Vertex’s Tax Research Team continues to monitor sales tax rates and rules changes on a daily basis at the state and local levels.
With respect to the rest of the world, we’ve recently seen European Union countries greatly accelerate traditional processes for enacting value added tax (VAT) rate and policy changes in response to COVID, and we’re prepared to respond should U.S. jurisdictions follow suit. We’re monitoring the growing number of reports mentioned above concerning COVID-related budget deficits at the state and city level, as they may be early indicators of future sales tax rate changes to come. Regardless of what occurs, we’ll keep you accurately informed in a timely manner.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.