Sales tax revenue goes toward implementing and maintaining needed public amenities. But have you ever stopped to consider how the revenue is divided among state entities and how changes to that system may affect your business in those jurisdictions? Some state legislators and county officials are looking to do just that with claims that the current allocations are outdated and that decades-old sales tax laws need to be adjusted to modern needs.

What is Sales Tax Disbursement

Sales tax disbursement refers to the redistribution of money originally collected as sales tax revenue. Just as they come from a wide range of sources, sales tax disbursements go to a number of different types of recipients. Counties, cities, and states, along with school districts and special districts, receive sales tax revenue and will either save or use it to fund their own operations.

Current Sales Tax Policies

In most states, a small portion of a state’s sales tax is divided and returned to districts where those with a larger population receive a larger sum, often referred to as “state turn-back funds.” The local option sales tax is also split evenly between the cities and state counties. Although, the county’s share is required to go toward funding local education.

The purpose of the legislation talks taking place around the country is to discuss what measures can be taken to ensure greater equality between revenue recipients. They are also working so that county governments receive enough sales tax revenue to compensate for cities that do not maintain local facilities.

How These Changes Can Affect Your Business

Even if the error was innocent, reporting and collecting the wrong sales tax rate can land you in hot water with auditors. If legislators change how sales tax revenues are distributed, jurisdictions will have even more of a reason to adjust their sales tax rates and more complex rules could be implemented. This move may even enable entities to enact special sales taxes that allow them to levy rates specifically for their needs, increasing compliance costs and difficulty.

Technology is the best way to keep up with ever-changing sales tax liabilities. In fact, Sales Tax DataLink offers the highest level of compliance and the most accurate jurisdiction rates on the market with our sales tax software FileLINK. We also offer a free evaluation using your own data to help you see where our software can help serve your business. Contact us today and put your mind at ease.

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