Navigating the state and local sales tax landscape remains a top challenge for many business owners. Tax laws only continue to evolve, making it difficult for owners to react and adapt their tax planning strategies to ensure they are compliant. Adhering to tax laws is a critical part of operating and maintaining a successful business, which is why it’s imperative for business owners to regularly monitor tax laws and stay up to date on changing policies.
Recently, there has been a wave of new sales tax laws in various states that may impact your tax planning procedures. We’ve rounded up the major updates so that you can adjust your tax strategy accordingly. Here are the latest changes that have hit the marketplace:
Retail Delivery Fees
Since Colorado enacted a Retail Delivery Fee (RDF) in 2022, other states are following suit. These fees are designed to fund and maintain state infrastructure projects.
- Minnesota enacts a new RDF effective July 1, 2024. An RDF of 50 cents will be imposed on each transaction of $100 or more with retail deliveries in Minnesota. This fee is imposed on both in-state and remote retailers.
- The Minnesota Department of Revenue (DOR) offers a small business exemption for retailers making MN retail sales totaling less than $1M in the previous calendar year.
- New York’s similar bill has yet to make it through the Senate, but is in motion, suggesting a 25 cent per online delivery sale within the limits of New York City only.
- The Colorado RDF is increasing from 27 to 28 cents effective July 1, 2023. This fee applies to taxable shipments to Colorado customers by both in-state and remote retailers.
- The Colorado DOR offers a small business exemption for retailers making CO taxable sales less than $500,000 annually.
Mid-Year Tax Rate Changes
Now that we are halfway through 2023, it’s common for many states to enact local sales and use tax rate changes mid-year. These states are making a change to state-level rates effective July 1, 2023.
- South Dakota reduces the State Sales and Use tax rate from 4.5% to 4.2%.
- New Mexico reduces the State Gross Receipts tax rate from 5% to 4.875%.
Economic Nexus Update
- Louisiana removed the 200-transaction threshold from economic nexus standards effective August 1, 2023. The economic threshold of $100,000 gross sales in the previous or current calendar year for remote retailers remains in place.
Staying current on ever-changing tax laws is no simple endeavor. It takes great diligence and effort to ensure laws are interpreted and implemented correctly, which means less time for owners to focus on growth and running their businesses.
If you operate in a multi-state environment and believe one or more of these updates may impact you, it’s recommended to reach out to your sales tax advisor so that they can help you navigate next steps. If you don’t currently work with an advisor, you may want to consider partnering with one as they can bring clarity and confidence to your sales tax processes through insightful expertise, resources and tools.
We’re Here to Help
Our firm has a team of trusted tax advisors who collaborate with clients every day to simplify sales tax complexities. We stay on top of legislation so that tax updates don’t pause operations and provide strategic advice for minimizing your business’s overall tax burden.
If you are interested in partnering with us to address your sales tax concerns, you must first take a nexus study so that our team fully understands your sales tax obligations. You can check out more details on the study and request one here. Have additional questions regarding sales tax compliance and our business tax services? Contact us today and one of our team members will be happy to assist you.
