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Sales Tax Rate Changes Accelerate This Year

Mike Bernard takes a mid-year look at Vertex’s 2023 Tax Rates and Rules report.

Sales & Use Tax

Indirect tax teams adjusting to U.S. sales tax changes should anticipate an interesting year ahead given the increase in new taxing cities and districts that have come online in the first half of the year compared to the same period in 2022. 

Here’s what strikes me as especially notable from our current data: 

  • New taxing cities and district taxes soar: Nearly twice as many new district taxes were enacted during the first five months of 2023 (100) compared to the same period in 2022 (54). The number of new district taxes enacted in just five months this year almost matches the number of new district taxes enacted all of last year (115). The number of new taxing cities that have appeared through May 31 this year (37) represents a 68% increase over the same period in 2022 (22).  
  • New taxing counties emerge: Through May 31 of 2022, just one new taxing county came online. This year, four new taxing counties have so far materialized. The number of county sales tax rate changes is also higher so far this year (46 vs. 42), with sales tax increases (33) outnumbering decreases (13) by a nearly 3:1 ratio.  
  • City rate changes decline but tax increases dominate: It’s good to see city rate changes (93 through May 31) down from the same period last year (146). That said, it’s notable that this year’s city tax increases (81) exceed decreases (12) by more than six to one.  

Here are a few other big-picture highlights from the research conducted from Jan. 1 through May 31, from Vertex’s Tax Research group:  

  • Since 2013, there have been 2,412 new sales and use tax jurisdictions;  
  • Since 2013, there have been 3,845 sales and use tax changes; and  
  • The combined number of new and changed sales and use tax rates since 2013 is 6,257. 

Another note to keep in mind — fees are becoming an ever-increasing form of tax in addition to sales and use tax. Not only are green fees (covering items such as rechargeable batteries, shopping bags, and packing materials) prolific and increasing but also fees associated with certain industries or localities. We’ve heard from numerous customers in the area of support on tackling fees at the local level. Examples include fees associated with entertainment, airports, delivery and trendy neighborhoods. Tax groups will need to make swift adjustments to help their organizations address the growing number of fees states and other local jurisdictions are enacting. 

I’ll keep you up to date on the final mid-year figures, along with related trend insights in an upcoming post.

 

Disclaimer

Please remember that the Vertex blog provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in the Vertex blog are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.

Blog Author

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Vice President of Tax Content and Chief Tax Officer

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Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.

Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.

Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.

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