State and local governments in the U.S. are relying increasingly on transaction-based taxes rather than income-based taxes to fill their coffers, as they are easy to implement and provide reliable revenue, according to a recent report from tax technology company Vertex.

Specifically, the report said states have come to recognize that, relative to income-based revenue streams, transaction-based levies like sales taxes are less vulnerable to adverse economic cycles, are generally easier to administer and audit due to lacking the many complex provisions of income tax systems, and they're easier to expand by either implementing new or higher rates, which allows easy adaptation to new income streams like digital products. For example, Washington State has proposed legislation that would impose a tax on the sales or exchange of personal data equal to the gross income of the business multiplied by 1.8%.

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By  Chris Gaetano