Finance teams can expect the slew of local sales tax rate increases that have occurred recently to keep pace for the rest of 2020.
In the first five months of the year, your team faced 150 city sales tax rate changes, according to research from Vertex. Of those 150 city sales tax changes, a whopping 140 were sales tax rate increases and only 10 were decreases. There were also 36 county tax changes, of which 89% were rate increases.
On top of tax hikes, your finance team should recognize all the additional taxes that are being imposed now: There were also 35 new city taxes and 88 new district taxes in the first five months of 2020.
Why the rise?
This spike in sales tax increases may be coronavirus-related, say the experts at Vertex. With local governments scrambling in a suffering economy, you know higher taxes – and new taxes – can act as a viable source of much-needed funds to fill revenue gaps. And sales tax is the second-largest source of state and local revenue, explains the Tax Foundation.
As a result, Vertex predicts significant sales tax rate changes at every level – state, county, city and district – to continue through the remainder of 2020.
As you plunge into the second half of the year, it’s a good idea to make sure both your A/R and A/P teams are aware of these trends and checking to see if any of the areas you do business in or with have been affected. That way, your company can ensure accuracy on both ends of the spectrum, whether it’s preparing invoices or issuing payments.
And of course, remind A/R and A/P to stay vigilant for and communicate openly about the sales tax rate changes that are predicted to come during the rest of the year.