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States Must Modernize Sales Tax Codes to Combat Base Erosion

May 4, 2022, 7:35 PM

The 45 sales tax states need to pursue meaningful tax modernization to combat a two-decade pattern of base erosion and bolster their broader revenue systems, a new report by the Tax Foundation reveals.

Sales tax systems should ideally be imposed on all final consumption of goods and services, but the states have consistently drifted from this goal over the last 20 years. Key developments contributing to base narrowing include the expansion of exemptions for groceries, utilities and certain products, and the growth in consumption of untaxed services compared to taxed goods, the report stated.

As a result, states have ...