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2022 Trends: what’s to come for e-commerce and sales tax
byDecember 3, 2021
The last two years have been tumultuous, to say the least. And as we approach the new year, a lot of folks are wondering what 2022 will have in store for us. While we don’t have a crystal ball that will predict the future with 100% accuracy, we’ve been tracking a few trends that will be good to keep in mind as you devise your compliance strategies for the coming year and more.
Don’t forget to check out The 2022 Sales Tax Preparedness Guide for a more complete rundown of trends–as well as a step-by-step guide to compliance in 2022.
Continued growth in e-commerce
The growth in e-commerce sales after the Covid pandemic has been, what’s the word we’re looking for, unprecedented. The data shows US e-commerce sales grew by 44 percent in 2020 as the pandemic sent shoppers online. A majority of this shift came from consumers who would have likely preferred to purchase in store but turned to online channels due to health and safety concerns. While some consumers might be eager to get back to physical retail, the e-commerce boom is here to stay.
What does this mean for your sales tax compliance? In e-commerce transactions, the point of sale is typically the customer’s ship-to address. This means that making sales to buyers across the country means you are now responsible for collecting varying amounts of sales tax depending on your customer’s location. Companies need to prepare a sales tax solution now to prepare for the continued growth of e-commerce.
Here’s more information on adjusting your business for an e-commerce first approach.
Remote work complicating sales tax compliance for companies
Since the pandemic kickstarted the remote work revolution, it has created a new level of compliance complexity for companies. This is because having employees in different states can trigger sales tax nexus and put the company on the hook for collecting, filing, and remitting sales tax in those states.
In some instances, it only takes one employee living in a state to establish physical nexus. As employees determine their strategy going forward in regards to where their employees work, they will need to keep in mind their sales tax implications when hiring and ensure they remain compliant. This means financial leaders will need to be in tune with overall company recruitment goals. When hiring in a new jurisdiction, it means a new team member but also a new sales tax responsibility. So it’s important to work together with the hiring team to make sure onboarding for new employees also means onboarding new nexus states.
Certain states paused their physical nexus laws around remote employees during the pandemic to avoid undue hardship on businesses. However, some of those holds were temporary and might have already expired. Here’s a good resource for finding out which states have provided relief or guidance.
States dropping economic nexus transaction thresholds
Transaction thresholds were a product of the Wayfair ruling. Now, a little over three years after the ruling, states are nixing the transaction thresholds to allow for some fairness for small sellers. Think about it using an example. Leo’s Pens sells 200 pens for 50 cents each. Under certain state’s transaction’s requirements, they would have economic nexus. These economic nexus laws were set up with larger sellers in mind, and not to be a burden on small sellers.
- Maine passed a sales tax law eliminating their 200 transaction economic nexus threshold for remote sellers. Starting January 1, 2022, a remote seller is only required to collect and remit sales tax if its sales into Maine exceed $100,000 in the previous or current calendar year.
- Wisconsin has enacted a new sales tax law that eliminates the state’s 200 transaction economic nexus threshold for remote sellers, effective February 20, 2021. Now, a remote seller is only required to collect and remit sales tax if its sales into Wisconsin exceed $100,000 in the previous or current calendar year.
Stay ahead of the trends with TaxJar
Sales tax and e-commerce is ever changing, so trying to keep up with all the new information can be daunting. TaxJar will keep you up to date on new changes and trends in e-commerce on our Sales Tax blog. And get ready for the new year with our 2022 Sales Tax Preparedness Guide. We’ll walk you through the steps to compliance, talk more about these trends and changes, and how to be prepared for the year ahead.