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Changes to Sales Tax: What to Expect Starting in 2021

New sales tax changes were expected in 2021, and it’s essential that business leaders and tax professionals learn how they can best prepare themselves for the upcoming developments.

The resulting changes due to the COVID-19 pandemic have influenced tax policy. States struggle with the implications of an increasingly remote workforce after employees across numerous industries transition to working remotely.

The Importance of E-Commerce

The eCommerce boom has provided a significant opportunity for companies with an established online sales channel. Still, many lacked the proper infrastructure or resources needed to make it happen. Brick-and-mortar businesses were scrambling to create one to avoid missing out on this sudden surge of demand from customers who wanted their purchases delivered straight away.

It’s been a struggle for many eCommerce sellers trying to keep up with the surge in sales. However, states that tax remote purchases benefit from a steady source of revenue.

The future of education is now digital. And so, too, are the tax rules that apply to it – thanks in part to recent Supreme Court decisions on virtual events such as conferences and classes online.

The convenience of Buy Online, Pickup In-Store (BOPIS) is often an attractive feature for consumers. However, it can be challenging to keep up with your inventory and ensure that all fees get charged correctly. However, these types of transactions can occasionally get complicated when it comes down to inventory tracking and sales tax compliance – which means having POS systems capable enough to take care of such complexities should be a high priority.

The recent pandemic has significantly affected how we live our lives. According to reports, one out of every five dollars spent during this past quarter was obtained from online orders and marketplaces such as Amazon.

When many states are struggling with how they should tax online sales, two have found an innovative solution. Florida and Missouri both require that out-of-state sellers collect taxes on any products sold into their marketplace, which will help them financially and gain back some revenue from what has been lost due to drops in retail trips or tourism rates within these respective regions.

Expected Changes For Marketplace Sellers

Marketplace sellers are in the process of being taxed by both state and federal governments. California claims that marketplace inventory should be subject to sales tax. At the same time, Washington feels this is not true because these platforms operate as neutral parties between buyers and sellers without any control over pricing or shipping fees charged during transactions on their site.

The lawsuits filed by these out-of-state sellers have created quite a stir. They argue that because their inventory gave them a physical presence in the state, they must register and remit sales tax before next year’s deadline date – even if it is against federal law at this time period! Other states can follow suit starting in 2021.

The economic nexus concept has been slow to catch on in most states, but that could change with the pandemic taking its toll. The need for more tax revenue may make some state governments more stringent about unregistered out-of-state sellers making sales within their borders.

Marketplace sellers are supposed to pay taxes on their goods, but many have avoided paying the owed revenue by storing merchandise in warehouses operated directly or indirectly by marketplaces. The inventory gives out-of-state Marketplace sellers a physical presence in the state, and therefore they are now required to register before collecting sales tax. Other conditions can follow suit next year with new laws calling for this type of compliance by all business owners who sell on marketplaces like Amazon or eBay.

With the growth of eCommerce, states have been pushing for their right to tax remote sales. Virtual events could eventually cause a similar revolution, with business owners being taxed more if they host these online conferences and virtual meetings instead of in person.

In an era where face-to-face customer contact is becoming increasingly difficult because of COVID -19, many manufacturers bypass traditional wholesale and distribution channels to sell directly.