Business
Vertex Details Trends Around Sales Tax and Recent Spike in Local Tax Rates
KING OF PRUSSIA, Pa., Sept. 15, 2020 (GLOBE NEWSWIRE) -- According to Vertex Inc., (NASDAQ:VERX) (“Vertex” or the “Company”), a leading provider of tax
About this update from Vertex, Inc.
[{"type":"text","content":"KING OF PRUSSIA, Pa., Sept. 15, 2020 (GLOBE NEWSWIRE) -- According to Vertex Inc., (NASDAQ:VERX) (“Vertex” or the “Company”), a leading provider of tax technology and services, trends are emerging that may create unique challenges for businesses with respect to city-level taxes, specifically as locales look to make up lost revenue caused by COVID-19.\n After reviewing standard sales tax rate changes during the first half of 2020, Vertex Vice President of Tax Research Bernadette Pinamont noted the following: There were no changes to any state tax rates, which has only happened twice in the past decade; andSixty-nine percent of new rates were created at the district level, and 75% of rate changes were enacted at the city tax level, both of which are on track to register their highest number of changes in more than 10 years. COVID-19’s Impact to Tax The flurry of activity at the city and district levels indicates that taxes will continue to play a major role in the post-COVID economy. Future adjustments could take the form of a tax decrease to stimulate economic activity. Jurisdictions could also increase sales tax as a “pay for” to generate revenue given the historic decline in state and local tax revenues and to offset debt and cover the high costs of COVID response activities. The growing number of reports concerning budget deficits related to COVID could be early indicators of future sales tax rate changes to come, such as the previously debated taxing of professional and digital services, once legislative sessions resume. According to the Center on Budget and Policy Priorities, projected state budget shortfalls expected from COVID-19’s economic fallout will total a cumulative $555 billion over state fiscal years 2020-2022. “If the current pace of local rate changes sustains during the second half of the year, the number of sales tax rate changes in 2020 would reflect the second highest (to 2017’s 725 rate changes after the Tax Cuts and Jobs Act passed) total in more than 10 years, increasing compliance burdens for businesses,” said Pinamont. Countries across the globe are making tax rate changes in response to COVID-19’s economic damage as well. Many nations temporarily decreased indirect tax rates for essential goods and have considered a temporary decrease of the standard or reduced indirect tax rates in response to the pand...