The tax revenues of state and local governments are still tanking. The Census Bureau yesterday released figures for the third quarter (a readable summary is available here), and it’s not a pretty picture. Overall revenue was down 6.7 percent compared with the same period last year. Corporate income tax fell a breathtaking 18 percent, from $11.6 billion to $9.5 billion. Receipts from sales tax and individual income tax also dropped, by 9 percent and close to 12 percent, respectively. Oddly enough, given the state of the housing market, property tax revenue was a relatively bright spot, eking out a 3.5 percent rise.

Inevitably, all of this will mean increased demands on governments’ favorite unpaid tax agents.

A new white paper from business information provider CCH, a Wolters Kluwer business, looks at what businesses can expect on the transaction tax side in the new year, including:

• Higher tax rates. While you can always hope that states will increase their efficiency and improve the enforcement of existing laws, “the preferred and easiest approach to adjusting to revenue shortfalls may be to have businesses and consumers shoulder the burden by having them endure tax rate increases,” notes CCH.

• Expansion of the tax base to include currently nontaxable services and digital products, and elimination of exemptions.

• Expanded nexus legislation. Companies will want to keep a close eye on the Main Street Fairness Act, soon to be introduced in Congress. The bill would allow states that subscribe to the Streamlined Sales and Use Tax Agreement to require remote sellers (such as online and catalog retailers) to collect and process sales tax.

• Increased government investment in sophisticated tax collection and audit selection technologies.

There’s one thing that you can bet these governments won’t be doing to save money in the new year, though, and that’s cutting their own headcount. As Bloomberg columnist Joe Mysak notes in this article, state and local authorities have so far managed to avoid laying off significant numbers of workers in this feeble economy. Indeed, some actually added employees in 2009. Maryland, for example, didn’t let a projected $3 billion budget gap for 2011 stand in the way of expanding its workforce from 108,600 early this year to 110,100 in November.

Must be nice to be so well insulated from the cold winds of economic reality. ###