Confirm Your Sales Tax!

New Year, New Rules – Confirm Your Sales Tax!

Sales tax compliance remains a critical concern for businesses in 2025, with several key developments to be aware of:

Economic Nexus and Marketplace Facilitator Laws

States continue to refine their economic nexus laws following the 2018 South Dakota v. Wayfair decision. Many states consider eliminating or lowering transaction thresholds to establish economic nexus[1]. This means more businesses may be required to collect and remit sales tax, even without a physical presence in a state.

Marketplace facilitator laws are also evolving, with states working to clarify:

• Which businesses qualify as marketplace facilitators
• What types of taxes are marketplaces responsible for collecting
• How to handle exempt sales and exemption certificates[1]

Changing Product Taxability

The taxability of various products continues to shift:

• More states are moving to exempt essentials like groceries, diapers, and feminine hygiene products
• New categories of goods may become taxable as states look to broaden their tax base[1]

Businesses selling various items across multiple jurisdictions need to track these changes carefully.

Compliance Challenges

Key compliance issues to monitor include:

• Retail delivery fees: Some states are introducing delivery fees to address environmental concerns around e-commerce[2].
• Sales tax holidays: These tax-free periods are becoming more common and diverse, creating compliance hurdles for multi-state retailers[2].
• Home-rule jurisdictions: States like Colorado that allow local tax administration add business complexity [2].

Staying Compliant

To navigate this complex landscape:

1. Work with tax professionals or services that provide up-to-date compliance information.
2. Regularly review and update sales processing systems to ensure proper tax collection and recording.
3. Consider voluntary disclosure agreements if you may have unmet past obligations[3].
4. Stay informed about AI developments in tax administration, which may simplify compliance in the future[3].

Failing to meet sales tax obligations can result in significant penalties. For example, operating without proper registration in New York can incur fines of up to $500 for the first day and $200 for each subsequent day[5]. Proactive compliance management is essential to avoid such consequences and ensure your business remains in good standing across all relevant jurisdictions.

Citations:
[1] https://www.avalara.com/us/en/research/tax-changes/sales-tax.html
[2] https://mosey.com/blog/sales-tax-compliance-guide/
[3] https://www.salestaxinstitute.com/resources/3-trending-2024-sales-tax-issues
[4] https://www.ncsl.org/state-legislatures-news/details/states-adapt-tax-laws-as-online-sales-surge
[5] https://www.tax.ny.gov/pdf/publications/sales/pub750.pdf
[6] https://www.avalara.com/us/en/research/tax-changes.html
[7] https://taxfoundation.org/research/all/state/2024-state-tax-changes-july-1/
[8] https://www.tax.ny.gov/bus/st/stidx.htm