March 2023 Roundup: Tax laws you need to know

While you focus on your business, we stay on top of legislative and policy changes that can affect your tax compliance.

Pants taxes. In putting together the perfect outfit, someone might buy khakis from the Mall of America in Minnesota, a button-down from a vintage seller in Texas, a jaunty hat from a boutique in Washington state, and funky socks from a subscription service based out of Ohio. Not only do each of these states tax clothing differently, but some don’t tax clothing at all, or they do, but not during tax-free weekends. Here’s what you need to know about collecting tax on clothing.

This little piggy went to the marketplace. Sales tax for any business is complex. But what if you’re managing taxes for a high volume of sales for multiple companies? Avalara Tax Changes 2023: Marketplace facilitators has the information to help you stay tax compliant in the U.S. and abroad. 

Nexus and you. If you have customers in other states, remote employees, or inventory in warehouses across the nation, you might have new sales tax obligations. That means you might be obligated to register to pay and remit taxes in new places to avoid noncompliance.

Sales tax rate changes are blooming. Every few months, states make changes to their sales tax rates. Here’s what’s taking effect on April 1.

How do you measure a year of lodging tax complexity? If finding a place to stay while on vacation in New York City or Sante Fe, New Mexico, is onerous for the vacationer, managing the lodging taxes associated with it can be even more so. A lot goes into renting out a hotel room. 

License to business. Business licenses, permits, registrations — whatever you call them, obtaining a license from your state and jurisdiction in order to conduct business and start collecting and remitting taxes is one of the first things you have to do when launching a new venture. But what exactly are they, and how do you get one?

Will electric vehicles drain state revenues? While a growing number of states are moving toward a greener future by banning the sale of new gas-powered vehicles, the downside of having more electric and hybrid vehicles on the road is decreased fuel tax revenue. Some states are getting creative by implementing new taxes and fees to recharge their state budgets.

Good news for your state landmark keychain business. In many states, economic nexus is determined by both gross sales and the number of transactions. But some states — including South Dakota of South Dakota v. Wayfair, Inc. fame — are doing away with the transaction threshold. This means that beginning in July 2023, if your business conducts 200+ transactions in the Mount Rushmore state in a year but doesn’t hit the $100,000 threshold, you wouldn’t have economic nexus there.  

Temporary tax rate relief. South Dakota is temporarily lowering its state sales and use tax rate from 4.5% to 4.2% starting July 1, 2023. Then, on July 1, 2027, the rate is returning to the 4.5% that Mount Rushmore State residents have grown accustomed to. This is due to the enactment of House Bill 1137, which aims to make good on a promise from 2016.

Relief for remote sellers. Currently, Arizona has a transaction privilege tax (TPT), instead of a statewide sales tax. This means the state’s 15 counties and 90+ municipalities levy their own taxes. But Senate Bill 1325, if passed, would make tax compliance a little less complicated for remote sellers by letting them pay a single municipal TPT rate.

What’s in a name? Arizona isn’t the only desert state aiming to shake up sales tax. New Mexico has been looking to call its “gross receipts tax” a “sales and use tax” instead. What would this change mean for companies that do business with the Land of Enchantment? Very little.

Delivery dilemmas. Since July 2022, retailers, florists, grocery stores, and other businesses in Colorado have been subject to a 27-cent delivery fee. While this has provided a boost to the state’s revenue, affected businesses have some issues with it. Senate Bill 23-143 is an attempt to make both parties happy.

1099 problems. When T.S. Eliot wrote that April was the cruelest month, perhaps he was also trying to figure out which 1099 form he needed to fill out for tax season. If only he’d had this blog to help him make sense of his many receipts and freelancing invoices.

If it’s not from the Champagne region of licensing, it’s just sparkling business permits. If you own a winery, brewery, or distillery; operate a beverage alcohol retail business; or work with third-party delivery apps, you already know there are a lot of licensing requirements in the industry. But how do you know which licenses you need to operate your business? And how do you obtain them? We’ve got you covered.

Real taxes on real property. What’s the difference between real and personal property? Your tax team needs to know how to manage the tax complexity for both. Learn more. 

Finance goes digital. Businesses are embracing technology to stay competitive, and accounting teams should be at the forefront of that. We listened in on a panel discussion between Avalara EVP of Customer and Compliance Operations Liz Armbruester and other industry leaders — here’s what the experts are saying.

Accounting for changes to the CPA Exam. Starting January 1, 2024, the Uniform Certified Public Accountant Examination (CPA Exam), is getting a new look. Aside from an updated infrastructure, the exam will include new discipline sections and a greater emphasis on technology. Kick off your study session with a blog post that details the changes.

Check out the Avalara resource center for more helpful information.