KING OF PRUSSIA, PA — Vertex, Inc. (NASDAQ: VERX) has unveiled its Mid-Year Rates and Rules Report for 2024. The findings highlight a sharp rise in local tax rates as municipalities across the U.S. seek new revenue sources due to economic pressures.
The report details significant changes in city-level tax rates, with a 67% year-over-year increase in adjustments. This surge reflects the urgent need for revenue at the municipal level, driven by evolving economic conditions and budget constraints.
“The landscape of sales tax and indirect taxation continues to change rapidly, both domestically and globally,” said Michael Bernard, Vertex Chief Tax Officer. Bernard emphasized the ongoing trend of cities and districts leveraging sales taxes and fees. He noted the increasing complexity of tax compliance for businesses, urging them to stay informed and agile.
Key findings from the report include:
City-Level Spikes: The first half of 2024 saw 159 city-level sales tax rate changes, a dramatic increase from 95 changes in the same period in 2023. This 67% rise highlights cities’ proactive approach to managing revenue amid economic pressures.
Net-New Taxation: New taxing cities and districts are on the rise, with 30 new taxing cities and 77 new district taxes in the first half of 2024. This trend contrasts with state-level tax changes, which require more time and legislative effort.
Local Focus: Local governments have increased sales tax rates significantly, with three times more county-level increases than decreases, and 12 times more city increases than decreases. Persistent inflation, the need to maintain public services, and rising costs of issuing bonds are driving this trend.
New and Unique Fees: States are also implementing various fees, including those for airports, the environment, special districts, and retail delivery. Vertex solutions now support approximately 1,400 fee impositions, up from about 400 two years ago.
On the global stage, VAT remains a crucial funding source for governments, despite most countries avoiding increases to prevent inflation and competitive disadvantages. The EU is likely to see a rise in environmental taxes, particularly carbon-related fees, highlighting the evolving nature of indirect taxation worldwide.
Vertex’s report paints a clear picture of the shifting tax landscape. Businesses must navigate these changes carefully, leveraging advanced tax technologies to stay compliant and manage the complexities effectively.
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