The future of COVID-19 sales tax relief in Arizona, Louisiana, and Michigan

The tenacity of the coronavirus (COVID-19) has prompted many states to pause or reverse their reopening plans, putting additional stress on affected businesses. To help these businesses stay solvent, some states have extended their sales tax relief programs. Most are letting sales tax relief expire.

Arizona recently announced transaction privilege tax (TPT) relief. Taxpayers unable to file or pay TPT, county excise taxes, or municipal privilege taxes for tax periods beginning February 1, 2020, may request an abatement from late filing and late payment penalties by completing Form 290. Relief isn’t guaranteed: It will be provided on a case-by-case basis.

The Louisiana Department of Revenue is now required to waive certain late filing and late payment penalties and interest for taxes with an original due date between March 11 and July 15, 2020, provided the taxes are paid and returns filed by November 15, 2020. There is a caveat: The relief applies only to taxpayers whose health (or the health of their tax preparer) was impacted by COVID-19. Taxpayers must apply for this relief.

In April, California created a sales and use tax relief payment plan for small businesses. Qualifying businesses that participate in this 12-month interest-free payment plan have until July 31, 2021, to pay what they owe. Find more details about these and other states in our COVID-19 tax relief roundup.

Earlier this month, Michigan Governor Gretchen Whitmer vetoed several bills designed to provide taxpayers with additional relief:

• HB 5761 and HB 5810 would extend the payment deadline for summer 2020 property taxes until March 1, 2021
• SB 935 would allow qualified use tax filers to defer payment of qualifying use taxes until November 20, 2020, and remit them in installments
• SB 936 would allow qualified sales tax filers to defer payment of qualifying sales taxes until November 20, 2020, and remit them in installments
• SB 937 would allow qualified taxpayers to defer qualifying income withholding tax payments until November 20, 2020, and remit payments in installments

Her veto message for the house bills explained that “these bills create more problems than they solve” by jeopardizing “the availability of credit to local units of government.” Furthermore, “these bills suffer from fatal constitutional flaws.” She called for Congress and the Trump Administration to provide “additional resources for states and localities to address the budget shortfalls caused by the unprecedented COVID-19 public health crisis.”

The governor stated the senate bills were “a commendable effort to provide relief to the people and businesses of Michigan during an unprecedented time of crisis.” However, she believes they would also “wreak havoc on local budgets” and frustrate “ongoing efforts to provide tax relief while maintaining revenue.”

Michigan did provide some tax relief, but it expired. It allowed taxpayers to postpone sales, use, and withholding tax payments due March, April, and May until June 20, 2020. Other states that allowed sales tax relief to expire include Alabama, Florida, and Illinois.

All states encourage businesses to remit sales and use tax on time, even during these difficult times. Consumers pay it to businesses trusting the businesses will, in turn, remit it to the appropriate tax authority. If left unpaid, states will keep after the business until it’s paid. Should a business close or declare bankruptcy, sales tax liability transfers to the owner.

Avalara’s COVID-19 tax information hub provides up-to-date information about global relief related to the pandemic.