2016 Election Overview: new taxes, changes in existing rates and restrictions on implementation of new taxes

November 10, 2016 Matt Walsh

Tuesday, November 8th was Election Day in the United States. Federal, state and local offices and ballot questions brought millions of American’s to the polls. As with every election there were results that were expected, some surprises and many changes that will impact the business community in the coming years.

Sovos will be monitoring all these changes and keeping you and our systems updated as changes are enacted or become effective.

Federal Level

The election of Donald Trump as President, and the Republican control of both the House and the Senate, can mean expansive changes to tax and trade policies over the next four years. Exactly what those changes will be and the impact on business is still to be determined.

State Level

Many state and local tax initiatives were voted on across the country. The changes included a broad spectrum of enacting new taxes, raising existing rates and restricting the implementation of new taxes. All of these local changes will need to be managed by businesses in these locations.

The Presidential Election and Federal Legislation

On November 8th Donald Trump was elected to be the 45th President of the United States. Trump being a political newcomer, when coupled with his strong opinions and surprise win has left many wondering how this new president will change or impact tax policy.

Throughout the campaign cycle President-elect Trump made a number of campaign promises, including proposed changes to the tax code, trade agreements, immigration, and the Affordable Care Act (ACA). As is typical with campaign promises, the details as to how and when all this will be done are scant.

Between now and inauguration day, January 20, 2017, Donald Trump will assemble his transition team, and start to provide more details around his policy plans. As to how his agenda will take shape is relatively unknown. Attempting to predict or expound on priorities at this point would be mere speculation.
One of the policy changes espoused by Trump is of great interest to our clients, his proposal to repeal and replace the ACA.

To fully repeal the ACA would require at least 60 votes in the Senate, which is known as a super majority. Obtaining 60 votes is a significant hurdle and full repeal seems unlikely at this point. However, the President and Congress could institute major changes to the ACA without fully repealing it. How those changes would be accomplished, the form they would take and the impact on the business world is yet to be flushed out.

In addition to potential changes to the ACA, we are closely monitoring legislation pending in the House and Senate, which could alter rules regarding the state’s ability to collect sales tax on remote sales. This legislation was introduced long before this presidential election and is supported by both Democrats and Republicans. What if any impact the election of Donald Trump has on this legislation is also unknown. Sales tax policy changes were not a campaign issue for any of the Presidential candidates.

Our Tax team is closely monitoring the legislative and political landscape. We will be paying particular attention to any changes related to the ACA as they are discussed, debated and potentially voted on. We will provide accurate and up-to-date information as any changes unfold.

State and local changes

While the Presidential election has been front and center of the election coverage, Sovos has also been monitoring state and local election results impacting taxes and tax policy. Below is a summary of some of the more impactful changes for Sovos and our clients:

California

Citizens of California voted on Proposition 67 which remains too close to call. If approved, it would ratify Senate Bill 270, instituting a statewide single-use plastic carryout bag ban and requiring stores to charge a minimum 10 cent fee on recycled, compostable, and reusable grocery bags. Currently voters favoring approval lead at 51.97%.

Minnesota Local Option Taxes

Several Minnesota cities had ballot questions to authorize each city to impose a local 0.5% sales and use tax to fund various city projects. Adoption of a local sales tax requires the approval of voters at a general election and is governed by Minn. Stat. § 297A.99. Per the Minnesota Secretary of State, the results for the ballot questions are as follows:

  • New London – Approved (69.84%)
  • Spicer – Approved (57.19%)
  • Virginia – Not Approved (49.68%)
  • Willmar – Not Approved (46.94%)

For New London and Spicer, the Minnesota legislature needs to approve the new tax before it becomes effective.

Missouri

Amendment 4 to the Missouri Constitution will prohibit a new state or local sales or use tax, or any similar transaction-based tax, on any service or transaction that was not subject to sales or use tax as of January 1, 2015.

Currently exempt services which will therefore remain exempt include family services, personal services, professional services and home services. Amendment 4 does not affect transaction-based taxes for tangible goods, whether or not those goods are purchased online, or currently taxable services.

Oregon

Oregon voters considered Measure 97, which would place a 2.5% gross receipts tax on certain corporations. The measure was soundly defeated with 59% of voters saying no.

Oklahoma

The state of Oklahoma placed State Question 779 on the ballot for the November 8 election. This would have raised the state sales tax rate by 1 percent in order to fund education. State Question 779 was soundly defeated, losing by nearly 20 points (41-59). As a result, Oklahoma’s sales tax rate will remain at 4.5 percent for the time being.

South Carolina

Several South Carolina counties voted to impose or raise local sales taxes as a result of ballot initiatives. Specifically, Charleston County voted to raise its local sales tax by half of a percent, increasing the county’s total sales tax rate to 9.0%. Union County and Horry County (the home of Myrtle Beach) both voted to impose local option sales taxes of 1.0%.

Jasper County voted to impose a 1.0% transportation sales tax to fund infrastructure improvements. However, Beaufort County voted not to impose an education capital improvements tax to fund the renovation of educational facilities in local school districts.

Nevada

State level Question 4, referred to as the Nevada Medical Equipment Sales Tax Exemption Initiative. Question 4 proposed a constitutional amendment which “requires the Nevada Legislature to exempt from sales and use tax durable medical equipment, oxygen delivery equipment, and mobility enhancing equipment prescribed for human use by a licensed health care provider.”
The initiative passed, winning 72 percent of the vote. However, the state requires, initiated constitutional amendments need to be approved in two even-numbered elections, meaning this measure would need to be passed again in the 2018 election in order for the Nevada Constitution to be amended.

Washoe County, Nevada

Question 1 on Washoe County, Nevada concerned a proposed a sales tax increase to fund local public schools. Washoe is the second-most populous county in the state, with a population of well over 400,000. The question was resoundingly approved with 57 percent of the vote. This increases the sales tax rate in Washoe County from 7.725 percent to 8.265 percent, eclipsing Clark County as the highest sales tax rate in Nevada.

Washington

Voters rejected a ballot initiative to impose a carbon tax in the state. The measure would also have reduced the sales tax rate by 1% over two years. I-732 would have reduced Washington’s sales tax rate from 6.5% to 5.5% by 2018.

Take Action

  • Check back for updates to state and local legislation affecting sales tax.

The post 2016 Election Overview: new taxes, changes in existing rates and restrictions on implementation of new taxes appeared first on Sovos Compliance.

About the Author

Matt Walsh

.Matt Walsh is the Principal of Indirect Tax. Matt and his department ensure that all Sovos tax and reporting solutions are compliant with global indirect tax laws. He also provides strategic direction, guidance and recommendations for product enhancements and development. Matt is also focused on fostering and managing government and industry relationships.Matt has over 17 years of experience in compliance, including starting as a tax counsel in the tax department and then advancing from Manager to Director of Tax Research and from there to Senior Director of Tax to his present position. He also was formerly a Team Manager at John Hancock Financial Services. Matt is currently a member of the Technical Advisory Group of the OECD (Working Party #9), which drafts model legislation and implementation guidelines for the taxation of cross-border services.Matt has a BS in Business Administration from the MA College of Liberal Arts as well as a JD from the New England School of Law.

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