What was North Carolina Thinking?

If you have taxable transactions in North Carolina, you will have 3 tax rates in 3 months.  In August the rate was 4.5%, in September the rate is 5.5% and in October the rate is 5.75%.  Forget the point that this is a 27% tax rate increase in 3 months, the bigger issue is that this process seems overly confusing.  In an effort to get more consistent sales tax compliance from non-resident businesses states need to keep the compliance as consistent and easy as possible. North Carolina has done a lot of juggling to stay in compliance with the SSTP when it comes to tax rates.  A few years ago, they had to re-label the reduced tax on manufacturing items so that they would not violate the SSTP rule on only having single sales tax rate.

Increasing sales tax rates is certainly an easy way to generate some additional tax revenue.  At some point, though, sales tax rates may become so high that they actually begin influencing purchasing decisions.  When that happens, tax revenue could decline which will put further pressure on states to find other ways to increase revenue or decrease services.