The Surge in State and Local Sales Tax Changes in 2023
The first half of 2023 has witnessed a substantial increase in state and local sales tax changes, reflecting governments’ growing reliance on indirect taxes to fund essential operations. These changes come as borrowing becomes more costly and the overall cost of delivering government programs, such as infrastructure and road maintenance, continues to rise.
A recent report by Vertex, titled the “2023 Annual Mid-Year Sales Tax Rates and Rules,” reveals a remarkable surge in sales tax modifications across the United States, especially when compared to the same period in the previous year. Through June 30, 2022, there were a total of 302 new sales taxes and tax rate changes at various levels, including state, county, city, and district. Fast forward to the first half of 2023, and that total surged to 431, marking a significant 43% increase.
This rise in sales tax changes was primarily driven by an increase in the number of new taxing cities and district sales tax rate alterations. In the first half of 2023, there were 37 new taxing cities, compared to 22 in the same period in 2022. Additionally, there were 148 rate changes at the district level during the same period, in contrast to only 37 in the first half of 2022, with most of these changes representing decreases in sales tax rates.
In conclusion, sales taxes have emerged as a more resilient funding method in adverse economic cycles over the past six decades when compared to income and property taxes. As we move further into 2024 and beyond, organizations must prepare for increasing creativity and complexity in state tax policies, leading to a patchwork of regulations. States like Maryland are already pushing boundaries with new taxes on digital ad revenue, signaling that governments will continue to seek consistent revenue streams in the evolving landscape of e-commerce. Businesses and tax groups will need to adapt and stay informed as these changes unfold.
Always consult with a tax professional and your investment advisor for personalized advice.
Renee Greenspan EA
