KBF Sales and Use Tax Newsletter – 2nd Quarter 2024

Here are recent court rulings, legislation, and administrative changes that have significantly impacted sales tax landscapes across the country.

State Attributes Third-party’s Activity to Taxpayer when Determining Nexus

Arizona has effectively expanded the scope of its sales tax by determining that businesses utilizing in-state distributors have a physical presence and thus have sales tax obligations. This ruling aligns with a broader trend of states seeking to expand their tax bases.

Digital Economy and Sales Tax

The digital economy continues to evolve, and so does its taxation. While the Colorado decision that streaming services are not subject to sales tax narrows the tax base, New York ruled in the opposite direction in determining that SaaS vendor management system fees are taxable.

Exemptions and Incentives
Several states have introduced new tax exemptions or modified existing ones. Oklahoma’s elimination of the state sales tax on food is a notable example, while Kansas has expanded its exemption list. Kentucky has also joined the trend by increasing its filing threshold and adding new exemptions. On the other hand, Vermont has taken a different approach by repealing the sales tax exemption for cloud software.

Administrative Changes and Clarifications

State tax authorities are continually issuing guidance and making administrative changes. Washington provided a clarification on the sales and use tax treatment of live online classes, and Texas amended its rules regarding the location where online orders are considered received.

Read more about these updates by downloading the file here. Please note that this is only an overview. Consult with your KBF service team, or find a KBF Tax professional here, for specific guidance.