FeatureA State DAT Relabeled a ‘Digital Barter’ Tax Is Still Bad Tax Policy (Tax Notes State, August 5, 2024) August 5, 2024

In this article, COST’s Karl Frieden and Doug Lindholm analyze California’s proposed digital advertising tax (DAT), comparing it with the existing Maryland DAT, and provide their rebuttal to Darien Shanske’s and Young Ran (Christine) Kim’s flawed characterization of and justification for the California DAT legislation as a digital barter tax. This article is a follow up to Frieden and Lindholm’s article on “State Digital Services Taxes: A Bad Idea Under Any Theory” that appeared in Tax Notes State on April 10, 2023. 

FeatureIs E-Invoicing Relevant In The US State Sales Tax Context? May 23, 2024

The Council On State Taxation (COST) and the State Tax Research Institute (STRI) are pleased to announce the release of the study, “Is e-invoicing relevant in the US state sales tax context?”  This study, prepared by EY Quantitative Economics and Statistics Group (QUEST), explores the rise of e-invoicing in tax administration in dozens of value-added tax (VAT) systems around the world and analyzes e-invoicing from a U.S. state tax policy perspective. The study highlights key differences between VAT and U.S. state sales tax systems that make e-invoicing less relevant in the United States.

FeatureWearing Blinders in the Debate Over Business’s ‘Fair Share’ of State Taxes (Tax Notes State, April 8, 2024) April 8, 2024

In this article, Karl Frieden rebuts the central thesis of the Tax Notes State roundtables of Dan Bucks, Peter Enrich, Michael Mazerov, and Darien Shanske that business does not pay its fair share of state and local taxes. He does so by using their own criteria for measuring “fair share” based on deviations from optimal or neutral tax design to show that business “overpayments” of sales and excise taxes on business inputs and property taxes on business property are 15 times or more greater than the roundtable members’ assertion of business “underpayments” of state corporate income tax.

FeatureCOST & STRI Release Paper Evaluating Mandatory Worldwide Combined Reporting March 8, 2024

We are pleased to share our latest paper documenting the harmful and unnecessary implications surrounding state adoption of mandatory worldwide combined reporting (MWWCR), by Douglas L. Lindholm and Marilyn A. Wethekam. 

FeatureDigital-Business Input Exemptions: Lessons from Sales Tax History January 29, 2024

COST’s Karl Frieden and Fred Nicely discuss how to design a sales tax system that exempts digital business inputs by looking back to states’ adoption of sales taxes in the 1930s and 1940s and the approaches to avoiding tax pyramiding in the manufacturing sector. This article is a follow up to the article Karl and Fred authored with Priya Nair on “Down the Rabbit Hole: Sales Taxation of Digital Business Inputs."

FeatureCOST Scorecard: The Best and Worst of State Tax Administration (2023) December 29, 2023

The Council On State Taxation (COST) is pleased to release its 2023 Scorecard on state tax appeals processes and administrative practices. This eighth Administrative Scorecard continues to apply objective criteria to evaluate independence in tax appeals systems and key procedural elements that impact taxpayers’ perceptions of fairness and efficiency.

Feature2023 State and Local Business Tax Burden Study December 22, 2023

The Council On State Taxation (COST) and the State Tax Research Institute (STRI) are pleased to announce the release of the 21^st annual study of state and local business taxes. The report, “Total State and Local Business Taxes: State-by-State Estimates for Fiscal Year 2022,” prepared by Ernst & Young LLP, shows all state and local business taxes paid in each of the 50 states and the District of Columbia. 

Businesses paid more than $1,074 billion in state and local taxes in FY2022, an increase of 13.7% from FY2021. State business taxes increased by 17.8%, and local business taxes grew by 8.8%. In FY2022, business tax revenue accounted for 44.6% of all state and local tax revenue. 

FeatureMinnesota's New Approach to Taxing Foreign Income Is Unfair and Unwise (Tax Notes State, August 21, 2023) August 21, 2023

COST's Karl Frieden and Fred Nicely examine how Minnesota’s new approach to taxing foreignsource income is unfair to U.S. multinationals, uncompetitive with other states, and likely violates the commerce clause based on U.S. Supreme Court precedents concerning discrimination, fair apportionment, and foreign commerce.

FeatureState Digital Services Taxes: A Bad Idea Under Any Theory (Tax Notes State, April 10, 2023) April 10, 2023

COST's Doug Lindholm and Karl Frieden highlight why states should not adopt digital services taxes.  In this comprehensive review, they critique the policy arguments made in favor of digital services taxes (DSTs) by a number of law and economics professors and explain why each one fails to provide a valid rationale for enacting a state DST. They review DST justifications based on an income tax “gap,” a severance tax, a regulatory tax, and an excess profits tax. However, they primarily focus on the consumption tax model that is emerging as the leading justification for enacting state DSTs. 

FeatureCOST Scorecard: The Best and Worst of State Sales Tax Systems (2022) December 28, 2022

The Council On State Taxation (COST) is pleased to release the second edition of its Scorecard on “The Best and Worst of State Sales Tax Systems.” Similar to other COST Scorecards, this Scorecard applies objective criteria to evaluate the states’ sales tax laws and rules that impact the fairness and efficiency of sales tax systems, for both sellers and purchasers.

FeatureLocally Administered Sales and Accommodations Taxes: Do They Comport With Wayfair? July 28, 2022

The Study effectively demonstrates that the burdens of complying with numerous disparate local tax regimes are extremely onerous, particularly in states that lack centralized collection and remittance of local taxes. The Study opens with a Foreword authored by well-known state and local tax experts Jeffrey A. Friedman and Nikki E. Dobay of Eversheds Sutherland LLP that evaluates and analyzes the legal framework and constitutional concerns surrounding state imposition of local taxes—particularly decentralized local taxes—after the Supreme Court’s 2018 decision in South Dakota v. Wayfair. 

FeatureResisting the Siren Song of Gross Receipts Taxes: From the Middle Ages to Maryland’s Tax on Digital Advertising July 21, 2022

In this study, Pomp traces the origins of gross receipts taxes (also known as “turnover taxes”) and their worldwide fall from grace by the twentieth century. He also analyzes the modest resurgence of gross receipts taxes at the state level in the United States, and why this mini-trend shares all the structural design defects that doomed their predecessors to near-extinction.

FeatureDown the Rabbit Hole: Sales Taxation of Digital Business Inputs July 18, 2022

In this article, Frieden, Nicely and Nair document for the first time that the sales taxation of business purchases of digital products (e.g. digital business inputs) is not just commonplace, but the overwhelming norm among states that tax software and digital products.  The taxation of digital business inputs undermines the optimal goal of states’ sales and use taxes to impose taxes on end-user consumption of products.  The authors recognize the interest of many states in expanding their sales tax bases to address digital products, but caution against base expansion that results in a pyramiding of sales tax on both business inputs and consumer sales.  

FeatureTracking Chart: State and Local Disaster Relief Guidance September 13, 2024

COST is tracking state and local tax relief guidance in response to fires and other natural disasters.

FeatureTracking Chart: State and Local Government Filing Relief due to COVID-19 December 27, 2022

To help our members keep track of state and local government filing relief due to COVID-19, COST is compiling a state-by-state chart of guidance that has been issued on the matter. COST staff will update the chart on a regular basis as we see more guidance. If you have any additional information to share that is not on the chart, please contact Pat Reynolds or Priya Nair.