Wednesday, March 10, 2010
According to the annual 2009 Sales Tax Rate Report by Vertex Inc., a provider of corporate tax advice, a record-breaking 7 states – in addition to one district – have increased their sales tax rate in 2009 and the average number of sales tax rate changes from 2008 to 2009 has increased by more than 30% compared to the average number of changes from 2000-2007.
According to Vertex Research, the new state increases and increased average of rate changes over the past two years is in direct response to state and local governments grappling with budget deficits of a magnitude that has not been experienced since the early 1940s.
“In the last several years, there has been a spike in the number of new city and special purpose business district sales taxes,” said John Minassian, Vice President Tax Content Development, Vertex. “We view this as a direct response to the economy which has caused a reduction in tax revenues from local to state levels.”
The 2009 report indicates:
Since 2000, there have been 2,631 new sales and use taxes levied – an average of 263 per year - according to the report. Meanwhile, 5,242 changes were made to sales and use tax rates, averaging 524 per year. The combined total of new and changed sales and use tax rates for the period is 7,873, or an average of 787 per year.
According to Vertex President and CEO Jeff Westphal, the pace at which tax changes are instituted and the complexity of tracking these changes presents a dynamic challenge to corporate tax and finance departments.
“The fluctuation of tax changes over the past decade – nearly 800 per year – means that organizations can no longer ignore the current state of their tax practices,” commented Westphal. “The changes reported in state, county, and city sales tax rates in 2009 continue to increase pressure on companies and their tax departments as it becomes increasingly difficult to manually keep pace with changes that could have a direct impact on their compliance and a company’s bottom-line.”