East Coast States Sales Tax Changes to Know

In the East Coast region, significant sales tax legislative changes happen on a daily basis.  

In fact, they happen so frequently that it is very difficult to stay on top of all of the latest changes. Trying to understand what the changes mean for your business is a whole other challenge. Without expert guidance, it can be hard to understand if and how they affect your company.

But sales tax legislative changes can have a big impact on your business operations. If you don’t know about significant changes affecting your company, how can you make the necessary changes to stay in compliance?

Let’s explore four recent sales tax updates that have taken place in the East Coast region. We’ll examine how these changes may affect your business operations, including some opportunities that may reap big benefits.

#1 – West Virginia Economic Nexus Legislation Became Effective January 1, 2019

In the wake of the South Dakota v. Wayfair decision, a number of states enacted economic nexus legislation to stay current with the changing sales tax landscape. West Virginia is one of the more recent states to do so, having enacted economic nexus provisions for out-of-state sellers that became effective on January 1, 2019.

Any out-of-state sellers (which includes online and more traditional sellers) who as of July 1, 2018 were not required to collect and remit West Virginia sales and use tax are now required to collect and remit West Virginia sales and use tax on all sales made on and after January 1, 2019 that are delivered into the state if the seller met either of the following requirements during the 2018 calendar year:

• The seller delivered more than $100,000 of goods or services into West Virginia, OR
• The seller engaged in 200 or more separate transactions for the delivery of goods and services into West Virginia

Whether a seller is responsible for tax collection and remittance will be determined annually each year thereafter. The requirement will apply for a given calendar year based on whether the seller meets either of the above thresholds in the immediately preceding calendar year.

So what does this mean for you? If you make sales into West Virginia, you’ll need to review your sales transactions into the state for the 2018 calendar year (and annually moving forward) to determine if you meet either of the state’s economic nexus thresholds. If you do, you must  register to collect and remit West Virginia sales and use tax and file returns.

If you need assistance determining whether you meet the West Virginia economic nexus thresholds, you should consider having a sales tax professional review your activity by taking advantage of our Wayfair Risk Analysis.

#2 – District of Columbia Increases Sales and Use Tax Rate (and Other Rates)

The District of Columbia recently increased its sales and use tax rate as well as a number of other tax rates. As of October 1, 2018, the follow tax rate increases are in effect for the District of Columbia:

• The sales and use tax rate increased from 5.75% to 6%
• The lodgings tax rate increased from 10.05% to 10.20%
• The sales and use tax rate on spirituous or malt liquors, beers, and wine sold for consumption off-premises increased from 10% to 10.25%
• The tax rate on charges for theaters and major entertainment venues increased from 5.75% to 6%
• The tax rate on rentals and leases of vehicles and trailers increased from 9% to 9.25%

If you make sales in District of Columbia , you need to ensure that you have updated your systems to reflect the new tax rates. Staying up-to-date with sales tax rate changes is a crucial part of remaining sales tax compliant. Not doing so can lead to increased audit risk.

#3 – Connecticut Updates Its Voluntary Disclosure Program

On November 6, 2018, the Connecticut Department of Revenue Services (DRS) released an updated information publication regarding the state’s Voluntary Disclosure Program. The program allows businesses and individuals that are not in compliance with Connecticut tax laws to voluntarily come forward to register or bring their accounts into compliance.

A taxpayer can contact the DRS to make arrangements for any of the following reasons:

• The taxpayer failed to pay Connecticut taxes;
• The taxpayer underreported income or gross receipts on which taxes should be paid; or
• The taxpayer has not reported transactions subject to Connecticut taxes

Programs like this are a great opportunity so it behooves any business to double check their activities in the state just in case. With voluntary disclosure you save on audit costs, assessments, and can usually negotiate payment terms.

Typically, taxpayers who participate in a voluntary disclosure program are offered favorable terms to pay their back taxes. Participants in the program must pay the total taxes and interest due for a period determined by the DRS in the Voluntary Disclosure Agreement (VDA).

There are some big benefits for qualified taxpayers participating in the program: no penalties imposed, a limited look-back period, and peace of mind from being discovered through Connecticut’s normal investigative or audit procedures.

Furthermore, Connecticut’s economic nexus legislation became effective on December 1, 2018, so there may be a need to register if you meet the state’s threshold for sales and transactions. Additionally, if you’re an online seller making sales through an online marketplace, such as Amazon, you may be holding inventory in states and therefore establishing physical presence nexus. If this is the case, you may want to consider a VDA to avoid costly penalties.

For more details regarding Connecticut’s Voluntary Disclosure Program, including how to participate in the program, see our news item.

#4 – Ohio Now Accepts Cryptocurrency for Tax Payments

In one of the more interesting recent state sales tax developments is perhaps a sign of things to come. The Ohio Treasurer recently announced that the state will now accept tax payments via cryptocurrency.

This makes Ohio the first state in the U.S. to accept cryptocurrency as a form of payment for state taxes. Currently, Bitcoin is the only cryptocurrency eligible for payment but the state looks forward to adding more cryptocurrencies in the future.

Some of the benefits of paying with cryptocurrency include real-time tracking of payments on the blockchain, secure payments that cannot be transferred to third parties with user initiation, and minimal fees to confirm transactions.

The state has launched a new website for cryptocurrency payments – OhioCrypto.com. Taxpayers can pay 23 Ohio business-related taxes on the website, including sales tax, consumer’s use tax and seller’s use tax. Note that the Treasurer’s office will continue to offer other forms of payment for state taxes.

If you’re looking to be on the cutting edge or just think that paying via cryptocurrency is the right fit for you, you can take advantage of this new offering in Ohio. It will be interesting to see if other states follow suit.

Many More East Coast Sales Tax Changes Are Taking Place

These are just four significant recent sales tax developments in the East Coast region. It’s important to realize that these sorts of sales tax changes happen every day across the states. And staying on top of them is crucial if you plan on staying sales tax compliant.

When you take the entire East Coast region into consideration, there are a lot of legislative changes happening that could have a real impact on your business operations. If you do business or make sales in the East Coast region, you’ll want to stay on top of the big changes taking place.