Sales tax compliance continues to evolve, with new rules and regulations emerging at both the state and federal levels. Businesses selling across multiple states—whether through e-commerce or brick-and-mortar locations—must stay ahead of changing requirements to avoid penalties and costly audits.

In this post, we’ll break down key changes in sales tax laws for 2025, highlight common compliance challenges, and provide strategies to help businesses stay compliant.

Key Sales Tax Changes for 2025

1. Expansion of Economic Nexus Rules

The landmark 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. allowed states to require out-of-state sellers to collect sales tax if they meet certain economic thresholds. Since then, nearly every state with a sales tax has implemented economic nexus rules. In 2025:

• More states are refining their thresholds, with some lowering the required revenue or transaction volume for businesses to trigger nexus.
• Some states are tightening enforcement and increasing audits of businesses selling remotely.

Example: A Texas-based online retailer sells products nationwide. If it surpasses $100,000 in sales or 200 transactions in Colorado, it must register to collect and remit Colorado sales tax.

2. Marketplace Facilitator Laws Updates

Most states require online marketplaces (e.g., Amazon, eBay, Etsy) to collect and remit sales tax on behalf of third-party sellers. However, 2025 brings:

• New reporting requirements for sellers using marketplaces.
• Adjustments to exemptions and collection responsibilities across states.

Example: A small business selling handmade goods on Etsy may no longer need to collect sales tax directly in certain states, as Etsy is responsible for remitting it. However, the business must still track where sales tax is being collected on its behalf.

3. Increased Enforcement of Digital Goods and Services Taxation

States are broadening the taxation of digital products and services, including:

• SaaS (Software as a Service) and streaming services.
• E-books, digital downloads, and online training courses.
• Cloud-based storage and other subscription-based services.

Example: A software company offering cloud-based project management tools may now need to collect sales tax in states that classify SaaS as a taxable service.

4. Greater Focus on International Sales Tax Compliance

Businesses selling internationally may face additional VAT (Value Added Tax) or GST (Goods and Services Tax) requirements, especially with more countries adopting digital tax rules. The U.S. may also see new reporting requirements for cross-border transactions.

5. Stricter Penalties for Noncompliance

States are increasing penalties for failure to collect and remit sales tax. Businesses should expect:

• Higher fines for late filings or incorrect reporting.
• More aggressive state audits targeting e-commerce and remote sellers.

How Businesses Can Stay Compliant

1. Determine Where You Have Nexus

Regularly review your sales activity across states to identify where you may have economic or physical nexus. Consider using automated software to track revenue and transaction thresholds.

2. Register in the Required States

Once nexus is established in a state, businesses must register for a sales tax permit and ensure compliance with collection and remittance rules.

3. Automate Sales Tax Collection and Reporting

Manual sales tax management can be overwhelming, especially for businesses selling in multiple states. Consider using tax automation software like:

• Avalara
• TaxJar
• Vertex

These tools integrate with e-commerce platforms and accounting software to calculate, collect, and file sales tax automatically.

4. Stay Updated on State-Specific Changes

Each state’s tax laws evolve regularly. Subscribe to state revenue department updates or work with a tax professional to monitor legislative changes.

5. Conduct Periodic Sales Tax Audits

Regular internal audits help identify errors before they become costly issues. Review:

• Sales tax collection and filing processes.
• Exemptions and resale certificates.
• State-specific compliance requirements.

Final Thoughts

Sales tax compliance is becoming more complex, and 2025 brings new challenges for businesses of all sizes. Staying ahead of regulatory changes, leveraging automation, and working with a knowledgeable tax professional can help ensure compliance and avoid penalties.

If you have questions about navigating evolving rules and ensuring that your business remains compliant in every state where you operate, leave a comment below or feel free to contact me directly. I’m happy to help!