US sales tax holidays are priced too high, critics say

This week in state tax news: These sales tax holidays are an even bigger bonus for buyers this year than they were in 2021, but they cost too much and are bad tax policy, according to a think tank. Meanwhile, digital taxes and dark stores are among the court battles to watch; Kentucky’s challenge to Covid aid restrictions heard on appeal courte; and Massachusetts told his state high court that the Wayfair Supreme Court decision that opened the door to the distance sales tax should apply retroactively.

“A billion here, a billion there, and soon you’ll be talking real money,” former Illinois senator Everett Dirksen reportedly joked, though he may not have said it at all. . The sentiment resonates for state revenue hawks, however.

The Institute of Taxation and Economic Policy published a report this week, finding that 20 states are expected to lose more than $1 billion in revenue this year due to sales tax exemptions on a variety of products ranging from back-to-school apparel to hurricane preparedness kits. That’s a huge increase from just a year ago, when states spent $550 million on tax holidays, the institute said.

2022 has been a big year for new tax holidays, as states are loaded with cash and eager to get their name back in front of voters. ITEP specifically highlighted Florida, which added holidays on construction tools, energy-efficient appliances, backup generators, children’s books and diapers. Mississippi declared a firearms and hunting supplies holiday, and Nevada created a special benefit for members of the National Guard.

“Sales tax holidays are poorly targeted and too temporary to significantly alter the regressive nature of a state’s tax system,” the ITEP report concluded. “Legislators need to understand that they cannot fix sales tax injustice simply by offering a short break in the payment of these taxes.”

A look at the courts

There’s a lot to follow in federal and state courts across the country, from Maryland’s digital ad tax battle to “dark store” disputes. Bloomberg Tax reporter Perry Cooper looks at big state cases and legal trends to watch as 2022 rolls on.

Covid help: from Kentucky The challenge to federal restrictions on Covid-19 aid has been criticized by a panel of judges from the United States Court of Appeals for the Sixth Circuit, on an appeal from the Treasury.

Internet Sales Tax: That of the Supreme Court Wayfair decision applies retroactively in a tax dispute between Massachusetts and a Californian online auto parts retailer, the state said in an appeal to its high court. The company owes the state $60,000 in sales tax for internet transactions, the state said.

Tax credits: The Connecticut The Court of Appeals ruled that a former UBS Investment Bank executive was not entitled to in-state tax credits based on stock purchases made between Connecticut and New York.

Property tax exemption: A charity’s lawsuit against New York City was kicked out of federal court. The U.S. District Court for the Southern District of New York said the charity, which sued the city to claim a property tax exemption, could only sue in state court, citing the tax injunction law.

Canceled award: The Missouri The Court of Appeals overturned a $55 million award to the cities of Joplin and Columbia after CenturyLink Inc. was sued by the cities for allegedly underpaying its taxes. The court said they failed to prove “the taxation of any particular category of income or receipts”.

Technics: Chicago and Apple Inc. have settled the tech giant’s lawsuit over a city-imposed tax on streaming entertainment services.

Fraud: A former Centurum Inc. executive has not sufficiently alleged that the company asked him to commit Paycheck Protection Program Fraud and that he informed anyone in the company of an alleged fraud, the U.S. District Court for the Intermediate District of Florida. The plaintiff filed a lawsuit after claiming he was fired in retaliation.

And in non-court news this week: California increases interest rates for corporations that receive refunds on overpayments and for taxpayers that pay less income tax.

Richard L. Militello