Anrok reviews recent state sales tax legislation, decisions and cases impacting companies in the digital economy. While most state legislatures are out of session in the summer, resulting in a quiet Q3 for new laws, there have been some noteworthy news stories as sales tax has entered the fintech mainstream.
Highlights from Q3 2021:
Class action suit filed against Peloton for improper collection of sales tax on digital subscriptions
States prepare for 2022 legislative sessions with an eye on increasing revenue
As governments look for growth opportunities out of the pandemic, compliance is increasingly important. Sales tax on software and the Internet economy will continue to expand, with several states looking into the specific revenue opportunities that the digital economy offers as discussed in our last update covering Q2 sales tax changes. Sales tax is quickly becoming akin to how startups do payroll tax withholding from day one.
Two years ago, subscription based products like Spotify or Netflix were minimally taxed, because users didn’t gain unlimited ownership over the content, which was a traditional characteristic on when a sale was taxable. However, states have begun to adjust their digital goods taxes to include subscriptions, which is why this quarter customers in some states are receiving updates from companies like Spotify.