States and Local Governments Look to Indirect Tax for New Revenue Streams

The pandemic strained state and local budgets for more than a year, and as jurisdictions begin to better understand their financial situations, they’ll be looking for more revenue¬—much of which comes from transaction taxes. With so many governments and districts working to close budget gaps, broadening the tax base through new transaction taxes and raising transaction tax rates are proving to be popular ways to fix this issue. This doesn’t just mean higher sales taxes, but also transaction taxes, including new district taxes and more digital taxation like extending sales tax to streaming video or music services.

Sales and transaction taxes already represent an average of 33% percent of state and local in jurisdictions that charge sales and use tax. 

Vertex Chief Tax Officer, Michael Bernard, touches on the latest Vertex mid-year sales tax rates and rules report and how states and local governments are looking to indirect tax for new revenue streams.