State Tax Trends to Watch in 2024

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Businesses and taxpayers must keep up with the most recent developments in the constantly changing world of state and local taxes. In the field of taxes, 2024 will see a number of new advancements and difficulties, including rate changes and legal disputes. This thorough guide will examine the most important state tax trends to be aware of in 2024, offering insightful information and analysis to both individuals and corporations.

1. Broad State Revenue Grab Continues

As states continue to look for new ways to raise money, one of the major trends to watch in 2024 is the widespread state revenue grab. Many states are looking to introduce new tax types and expand their tax bases as a result of increasing budgetary pressure. For instance, the digital advertising tax is still in place in Maryland, and lawsuits may soon follow. Minnesota has also adopted retail delivery fees, following Colorado’s lead, and it is expected that more states will follow suit. States’ attempts to increase revenue streams may have a big impact on taxpayers and businesses.

2. Income Tax Exposure Grows with PL 86-272 Modernization

Businesses may be exposed to more income taxes if states like California, New Jersey, and New York adopt or consider the Multistate Tax Commission’s (MTC) statement on Public Law 86-272. New Jersey has already adopted the MTC statement, but the ACMA lawsuit is against California. The decisions made in these cases may have a significant impact on companies that conduct business across state lines. It is imperative that companies keep up with these changes and make sure they are adhering to the constantly changing state tax regulations.

3. Streamlining State Tax Administration and Home Rule Enforcement

In 2024, efforts to simplify state tax administration will still be very important, especially in those states that enforce home rule laws. Colorado’s State and Local Tax System (SUTS), which includes nearly all cities, has advanced significantly. Setting an example for other states, Alaska has also taken steps toward a single filing system for home rules. Consequently, companies in states like Alabama, Alaska, Arizona, California, Colorado, and Louisiana should anticipate a rise in home rule audits. The objective of these optimized procedures is to facilitate business tax compliance and establish a more standardized tax administration structure.

4. Transaction Activity and SALT Implications

The increasing trend of mergers and acquisitions (M&A) raises important questions regarding state and local tax (SALT) implications. Businesses cannot avoid state sales tax obligations during sales transactions, so successor liability becomes an important factor to take into account. Sales tax obligations may arise from the sale of stocks or other assets, so it is critical to resolve any potential tax concerns prior to completing a transaction. It is important to conduct extensive due diligence and maintain compliance throughout the transaction process because buyers do not want to inherit the errors made by the previous owners.

5. CPA Firm Qualifications and Litigation Risks

Recent court cases highlight the significance of working with licensed tax professionals, as demonstrated by the ongoing North Carolina case. In this instance, the online retailer brought legal action against its CPA firm for neglecting to handle Wayfair-related matters, which led to expensive cleanup expenses. It emphasizes how important it is for companies to engage with CPAs and tax professionals who focus on state and local tax issues. It is crucial to select professionals with the experience and knowledge needed to handle the complexities of state and local tax laws because not all CPAs and sales tax experts are made equal.

6. Choosing the Right Sales Tax Automation

Businesses have additional options to choose from as the sales tax automation market grows more competitive. In the long run, this competition may result in lower prices because it spurs innovation. It does, however, also provide difficulties for companies looking to identify the best answer. Some businesses might make promises for advisory services that they are not authorized or qualified to provide. Working with sales tax professionals who can offer specialized solutions catered to their unique requirements is essential for businesses. This guarantees adherence and prevents expensive errors.

7. Federal-level Moore Case and SALT Considerations

There may be a cascading effect of the federal Moore v. United States case on state and local taxes (SALT). With ramifications for dividend-received deductions and other areas, this case raises the question of whether Congress can tax unrealized profits without allocating them to the states. Businesses should carefully follow this case’s development, as its outcome may have a big impact on how states handle taxes.

8. Apportionment Litigation Galore

As businesses contest the distinction between apportionable and allocable income, apportionment-related litigation is becoming more common. The distinction between business and non-business income is at issue in the Cities Management case, which is one noteworthy instance. The Department of Revenue was granted a technical victory by the Minnesota Supreme Court, which has consequences for companies doing business in the state. Furthermore, New Jersey’s aggressive approach to tax enforcement is reflected in the state’s adoption of revised MTC statements on P.L. 86-272 and modifications to Finnegan. Companies need to maneuver through these shifting conditions to guarantee adherence and reduce possible risks.

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9. Post-COVID Audit Enforcement

Following the COVID-19 pandemic, states are allocating greater funds for audit enforcement, with an emphasis on compliance. The pace of enforcement may quicken due to a shift from field audits to desk audits, which may be influenced by trends toward remote work. Companies should think carefully about lookback periods and create audit and remediation plans if they are not in compliance. Given the potential high costs of a sales tax audit, companies must take proactive measures to ensure compliance in order to avoid fines and other costs.

10. Automation Challenges in SALT Administration

Even though automation is being used more often in tax administration, audits show that some businesses might not be correctly collecting taxes. Laws changing, product codes changing, and the requirement for ongoing automated system updates and monitoring present challenges. Businesses occasionally use system overrides to remove taxes from invoices, which results in errors. Automation and ongoing review are critical to the management of sales taxes. To ensure compliance and accuracy in tax calculations, businesses must collaborate with experts who specialize in sales tax automation.

Check Out The Impacts of Inflation on Tax Brackets and Standard Deductions


Businesses and taxpayers must navigate a number of trends and changes in the state and local tax (SALT) landscape for the tax year 2024, which is complex and dynamic. The economic presence nexus standard and other new taxes, like those on digital goods and services, have expanded the tax base and put more on businesses that operate across state lines in terms of compliance. States’ use of sales tax is still changing; rate hikes and the enactment of laws affecting marketplace facilitators have an impact on both physical and online retailers.

Legislators at the state level are battling the need to balance state budgets and the uncertainty of the economy. Numerous changes to the tax code have resulted from this, including reductions in income taxes for individuals filing alone and modifications to the rates of personal income tax. In order to address budgetary constraints, states are also looking into novel revenue streams like flat tax systems and taxes on digital assets.

Changes to the Internal Revenue Code have an impact on state tax codes and the determination of taxable income, which in turn has an impact on the federal return’s influence over state tax policy. Taxpayers seeking to maximize their tax positions and assure compliance should be especially aware of how federal and state taxes interact. This is especially true during tax season.

The implementation of marketplace facilitator laws and economic nexus standards has had a substantial impact on sales tax requirements, imposing additional responsibilities on digital service providers and remote sellers. With adjustments to sales tax rates and the implementation of retail delivery fees in certain local jurisdictions, local sales taxes are also constantly changing.

Comprehending the ramifications of these tax adjustments for individual tax rates is essential to maximizing their tax returns. The availability of tax credits, like the child tax credit and the earned income tax credit, can result in larger refunds and substantial relief. Additionally, taxpayers need to understand how standard and personal exemptions affect their overall tax liability as well as the possibility of rate reductions.

State and local tax laws are dynamic, and keeping up with these changes is essential to managing them successfully. To fully comprehend the specific implications of these trends for their tax situation, taxpayers and businesses should consult with tax professionals and obtain additional information. In 2024 and beyond, taxpayers can optimize their tax outcomes and ensure compliance by being proactive and informed when navigating the complexities of state and local taxes.

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