Sales Tax Rate Changes Accelerate This Year

Indirect tax teams adjusting to U.S. sales tax changes should anticipate an interesting year ahead given the increase in new taxing cities and districts that have come online in the first half of the year compared to the same period in 2022. 

Here’s what strikes me as especially notable from our current data: 

• New taxing cities and district taxes soar: Nearly twice as many new district taxes were enacted during the first five months of 2023 (100) compared to the same period in 2022 (54). The number of new district taxes enacted in just five months this year almost matches the number of new district taxes enacted all of last year (115). The number of new taxing cities that have appeared through May 31 this year (37) represents a 68% increase over the same period in 2022 (22).  
• New taxing counties emerge: Through May 31 of 2022, just one new taxing county came online. This year, four new taxing counties have so far materialized. The number of county sales tax rate changes is also higher so far this year (46 vs. 42), with sales tax increases (33) outnumbering decreases (13) by a nearly 3:1 ratio.  
• City rate changes decline but tax increases dominate: It’s good to see city rate changes (93 through May 31) down from the same period last year (146). That said, it’s notable that this year’s city tax increases (81) exceed decreases (12) by more than six to one.  

Here are a few other big-picture highlights from the research conducted from Jan. 1 through May 31, from Vertex’s Tax Research group:  

• Since 2013, there have been 2,412 new sales and use tax jurisdictions;  
• Since 2013, there have been 3,845 sales and use tax changes; and  
• The combined number of new and changed sales and use tax rates since 2013 is 6,257. 

Another note to keep in mind — fees are becoming an ever-increasing form of tax in addition to sales and use tax. Not only are green fees (covering items such as rechargeable batteries, shopping bags, and packing materials) prolific and increasing but also fees associated with certain industries or localities. We’ve heard from numerous customers in the area of support on tackling fees at the local level. Examples include fees associated with entertainment, airports, delivery and trendy neighborhoods. Tax groups will need to make swift adjustments to help their organizations address the growing number of fees states and other local jurisdictions are enacting. 

I’ll keep you up to date on the final mid-year figures, along with related trend insights in an upcoming post.