Putting recent sales tax changes into context

Recently, there was an article making the rounds about record growth in U.S. sales tax rates and rule changes in 2025.

Headlines like that can feel unsettling at first glance. More rules. More changes. More complexity layered onto a system that already feels hard to keep up with.

But it’s worth pausing before reacting, because this kind of news is pointing to something structural rather than something sudden.

Sales tax changes are a symptom, not a surprise

Sales tax rules don’t change in a vacuum.

States rely heavily on sales tax revenue, and when there’s fiscal uncertainty, pressure often shows up through new rates, expanded tax bases, and more granular rules. That pattern isn’t new, and it isn’t specific to any one year.

What is changing is the pace.

As commerce becomes more digital and more cross-border, states are continually adjusting their systems to catch up. Those adjustments aren’t always elegant, but they’re part of an ongoing evolution rather than a breakdown.

More rules don’t automatically mean more burden

It’s easy to assume that more sales tax rules automatically translate into more work for businesses.

In practice, the impact depends on how a business is set up.

For businesses with a stable foundation, incremental changes tend to be absorbed quietly. Rates update. Definitions shift. Filings continue. It’s not always pleasant, but it’s manageable.

For businesses without that foundation, each change can feel personal and urgent.

This isn’t about doing more, it’s about doing enough

News about rising rates and expanding rules can create the impression that businesses need to constantly chase compliance perfection.

That’s not realistic, and it’s not necessary.

What works better is a proportional approach. Understanding where sales tax is material. Paying attention where it matters most. Letting lower-impact areas remain monitored rather than optimized.

That mindset doesn’t ignore compliance. It keeps it sustainable.

A system that’s still evolving

Sales tax in the U.S. has always been fragmented, and it’s still evolving. The pace of change can be frustrating, but it’s also predictable.

For businesses, the goal isn’t to stay ahead of every rule change. It’s to build enough structure that change doesn’t derail focus.

When that structure exists, headlines about record growth in sales tax rules don’t feel alarming. They feel like confirmation of something you already know: this system moves, and your job is simply to move with it.

Why large companies can absorb sales tax compliance more easily

Sales tax compliance often gets framed as a question of effort.

If you just try harder. If you just get better systems. If you just “take it seriously.”

But the real difference between how large companies handle sales tax and how small businesses experience it has much less to do with effort and much more to do with structure.

Large companies don’t comply more easily because they care more. They comply more easily because the system fits them better.

Scale changes how compliance feels

For large companies, sales tax is one line item among many.

They have dedicated teams. Clear owners. Budget allocated specifically for compliance work. When something changes, it gets routed to the right person, reviewed, and addressed as part of a broader operational machine.

The cost of compliance, while real, is spread across a large revenue base. Adding another state filing or another software module doesn’t fundamentally change how the business operates. It’s incremental.

For small businesses, that same requirement can feel disruptive.

There usually isn’t a sales tax team. The work lands on someone who already has a full role, often finance, operations, or the founder themselves. Each new obligation introduces context switching, new systems, and more mental load.

The work is the same in theory. The impact is not.

Fixed costs hit small businesses harder

Sales tax compliance carries a lot of fixed costs.

Software subscriptions don’t scale down gracefully. Advisory support has a minimum viable price. Filing requirements exist regardless of how much tax is actually due.

For a large company, these costs are proportionate. For a small business, they can feel outsized.

That imbalance is not a reflection of sophistication or responsibility. It’s a math problem.

When compliance costs consume a meaningful share of time, attention, or budget, they naturally feel heavier.

Complexity doesn’t scale evenly

Another difference is how complexity is absorbed.

Large companies expect complexity. They build systems to manage it. Sales tax is one more regulated area alongside payroll, benefits, data privacy, and procurement.

Small businesses often grow into complexity unexpectedly.

A new sales channel. A big customer. A successful marketing push. Suddenly the compliance footprint expands, even though the internal structure hasn’t caught up yet.

This mismatch creates friction. Not because the business is doing something wrong, but because the system assumes infrastructure that hasn’t had time to form.

This isn’t a failure of small businesses

It’s important to say this clearly.

When small businesses struggle with sales tax compliance, it’s not because they’re careless, unsophisticated, or unwilling to do the work. It’s because the system was designed around larger operators and later extended downward.

Many small businesses do an impressive job navigating that gap. They prioritize. They make tradeoffs. They focus on what’s material.

That’s not cutting corners. That’s operating responsibly within constraints.

What “good” looks like for small businesses

For small businesses, success in sales tax compliance doesn’t look like mirroring a large enterprise.

It looks like clarity.

Knowing where sales tax matters most. Having a setup that’s stable, even if it’s not perfect. Using tools and advisors thoughtfully, not reactively. Making decisions in proportion to the business’s size and activity.

When sales tax is approached this way, it becomes manageable rather than overwhelming.

Large companies absorb sales tax compliance because the system was built for them.

Small businesses succeed when they adapt the system to fit their reality.

That adaptation is not a weakness. It’s a form of maturity.

And it’s often the difference between sales tax feeling like a constant burden and sales tax quietly doing its job in the background.

A steady way to think about sales tax decisions

Most businesses don’t struggle with sales tax because they’re careless.

They struggle because sales tax sits at the intersection of growth, operations, and regulation, and it rarely comes with clear signals that you’re doing “enough.”

A steadier way to approach sales tax starts with letting go of the idea that every decision has to be perfect. What matters more is whether your decisions are intentional and informed.

Sales tax is a decision system, not a danger zone

Sales tax gets framed as something to avoid getting wrong.

A more useful way to see it is as a series of decisions that evolve as your business evolves.

Where you sell. What you sell. Who you sell to. How visible your business is. These inputs change over time, and sales tax expectations change with them.

That doesn’t mean you’re constantly at risk. It means the system expects periodic recalibration, not constant vigilance.

Good decisions are proportional, not exhaustive

Well-run small businesses don’t try to optimize sales tax everywhere at once.

They focus where activity is meaningful.

They pay attention to the states that drive real revenue. They understand whether their products are generally taxable or not. They know which sales channels carry most of the volume.

This isn’t about ignoring the rest. It’s about sequencing attention.

Maturity in sales tax looks like knowing where to focus first.

Confidence comes from visibility, not certainty

Sales tax will always carry some ambiguity. That’s built into the system.

What reduces stress isn’t eliminating ambiguity. It’s having enough visibility that ambiguity doesn’t feel threatening.

The goal is steadiness, not perfection

The healthiest sales tax setups feel boring.

Returns get filed. Numbers mostly make sense. Exceptions are noticed. Questions have a place to go.

There’s no sense that everything is fragile.

That steadiness doesn’t come from eliminating issues. It comes from understanding your system well enough to trust it.

Sales tax as a background process

When sales tax is working well, it fades into the background.

Not because it’s unimportant, but because it’s appropriately contained.

It stops competing for attention with product, customers, and growth.

And that’s the real goal.

Not fear avoidance.
Not zero exposure.
Just a business that knows how to carry this responsibility without it carrying them.

How to get the most out of your sales tax software

Sales tax software can be a huge relief when you’re growing.

At a certain point, keeping up with rates, thresholds, filings, and reports manually just stops making sense. The system is too fragmented and the volume too high. Software gives you structure. It gives you consistency. It gives you back some mental space.

That alone is a win.

As mentioned in previous notes, where things tend to go sideways is not because the software is bad. It’s because expectations are off. Sales tax software works best when it’s treated as a support system, not a substitute for understanding how your business actually operates.

The good news is that getting real value out of your software doesn’t require becoming a sales tax expert. It just requires a little intention.

Start by keeping the foundations in sync

Sales tax software is only as good as the information it’s built on.

Product categories, taxability settings, customer types, shipping treatment, and sales channels all shape the results the system produces. As your business evolves, those foundations need light maintenance.

You don’t need to revisit everything constantly. But it helps to periodically ask:

• Are we selling anything new or in a new way?

• Have we changed how we bundle, price, or ship?

• Do our exemption settings still reflect reality?

Small check-ins like this keep the software aligned with your business and prevent slow drift over time.

Use dashboards as conversation starters

Most platforms surface dashboards that flag nexus exposure, filing status, or unusual activity. These tools are genuinely helpful, as long as they’re used in the right spirit.

Think of them as signals, not instructions.

A nexus alert doesn’t mean “register immediately.” It means “pause and take a look.” Are the sales taxable? Are they marketplace sales? Is the measurement period correct? Is action required now or simply something to monitor?

Using dashboards this way keeps you informed without putting you in reaction mode.

Make space for the non-routine

Every business has transactions that don’t fit the normal pattern.

Large one-off sales. Custom contracts. Refunds handled manually. Adjustments made outside the usual workflow. These are normal, healthy parts of running a business.

They’re also the places where automation struggles most.

The goal isn’t to eliminate exceptions. It’s to notice them. Even a lightweight habit of reviewing non-routine transactions once a month can prevent most downstream issues.

Keep a human in the loop

Sales tax software is excellent at handling volume. It’s not designed to understand context.

The setups that work best always include a human checkpoint. Someone who reviews filings before submission. Someone who opens notices when they arrive. Someone who occasionally sanity-checks whether the outputs still make sense.

This doesn’t need to be a full-time role. It just needs to exist.

Think of it less as oversight and more as stewardship.

Remember what success actually looks like

The goal of sales tax software isn’t perfection. It’s stability.

Used well, it reduces friction. It creates consistency. It allows small teams to operate at a scale that would otherwise be difficult or impossible.

You don’t need to know everything about sales tax to use software well. You just need to stay curious about your business and willing to check in on the system from time to time.

Unless you're twisted like me, sales tax will probably never be the most exciting part of your work. That’s okay.

When software is used thoughtfully, it fades into the background where it belongs, quietly supporting the parts of your business that actually matter.

And that’s exactly what it should do!

What sales tax software can’t know about your business

Yesterday I wrote about why sales tax software is necessary but not sufficient. Today I want to dig into the part that software simply can’t see.

Sales tax software is very good at working with the information it is given.

Software does not observe your business. It does not ask questions. It does not get uncomfortable when something looks off. It simply processes inputs and applies rules.

When those inputs are clean and complete, the results are usually fine. When they are not, things quietly drift.

The first blind spot is product taxability.

Sales tax software relies on product mappings. Someone has to decide how each product or service is classified in the system. Is it taxable. Is it exempt. Is it partially taxable. Does the treatment change by state.

Those decisions are rarely straightforward. Definitions vary. Edge cases are common. And businesses evolve over time. New products get added. Old ones change. Bundles appear. Shipping gets handled differently. Repairs get handled differently.

Software does not revisit those decisions unless someone tells it to.

Another blind spot is customer behavior.

Software can store whether a customer is marked as tax exempt, but it cannot tell you whether that designation is accurate. It cannot know whether an exemption certificate is missing, expired, invalid for a particular state, or inappropriate for the type of transaction.

It also cannot sense patterns.

It does not notice when a large percentage of customers are marked exempt without documentation. It does not get uneasy when the same exemption is applied across multiple states with very different rules. It does not flag when exemptions are being used to paper over operational friction.

That kind of awareness only comes from review.

Sales channels add another layer of complexity.

Marketplace rules vary by state. Some platforms collect and remit tax on your behalf. Some do not. Some do so only in certain jurisdictions. Software can be configured to account for this, but it depends entirely on how sales are tagged and how channels are mapped.

If something is misclassified, software will not question it.

One-off and non-routine transactions are another common problem.

A large enterprise sale. A custom contract. A refund processed outside the normal workflow. A refund of sales tax only, without a product refund. A manual journal entry. These transactions often behave differently from day-to-day sales, and they are easy to mishandle in automated systems.

Humans recognize when something is unusual. Software does not.

Finally, software does not understand risk.

It does not know which states matter most to your business. It does not know which states are more compliance-aggressive. It does not know where your exposure is material versus theoretical. It does not know when a decision is low-risk but noisy, or high-risk but unlikely.

That context lives outside the system.

None of this means sales tax software is ineffective. It means it is limited.

Software is excellent at volume. It is not good at nuance.

The businesses that struggle most with sales tax compliance are not the ones without software. They are the ones who assume software replaces understanding.

The businesses that do best treat software as an engine, not a brain. They review outputs. They sanity-check inputs. They periodically step back and ask whether what the system is producing still matches how the business actually operates.

Sales tax compliance is not about perfection. It is about awareness.

Software helps you scale. Awareness helps you stay grounded.

Why sales tax software is necessary but not sufficient

At some point, almost every growing business reaches the same conclusion about sales tax.

“I think we need software.”

That conclusion is usually correct.

Once you are selling into multiple states, manually calculating rates, tracking thresholds, and preparing returns becomes unrealistic. The system is too fragmented, the rules change too often, and the margin for error is too small. Software is not a luxury at that stage.

But here is the part that is often misunderstood.

Sales tax software does not solve sales tax compliance. It supports it.

That distinction matters more than most businesses realize.

Sales tax software is very good at doing exactly what it is designed to do. It can calculate rates at checkout. It can aggregate transaction data. It can prepare return files. It can even submit filings on your behalf.

What it cannot reliably do is verify that your product and taxability inputs are correct, even though those inputs are the foundation of the system. It cannot consistently identify outlier or non-routine transactions that flow into the software incorrectly. It cannot confirm whether a customer is truly tax exempt or simply marked that way in the system. More broadly, it cannot understand your business.

Those gaps require human oversight.

This becomes especially obvious during nexus analysis. Many platforms offer dashboards that flag where you have “economic nexus.” Those tools are useful starting points, but they are blunt instruments. They often rely on simplified assumptions about what counts toward thresholds and when registration is required.

In practice, those assumptions can be wrong or incomplete.

I have seen businesses register too early based on software alerts, creating filing obligations in states where they had little or no taxable exposure. I have also seen businesses rely too heavily on automation and miss notices, filing errors, or registration gaps because they assumed everything was being handled.

When something goes wrong, the liability does not sit with the software provider. It sits with the business.

That is an uncomfortable reality, but it is an important one.

None of this is an argument against sales tax software. Quite the opposite. Software is often the only way small teams can keep up at all.

The problem arises when software is treated as an autopilot rather than a tool.

Sales tax compliance works best when software handles volume and humans handle judgment. When businesses understand what the software can do well, where it is blind, and where review is still required.

The most successful teams I work with are not the ones with the most sophisticated tools. They are the ones who understand their own risk, review their data regularly, and use software as support rather than as a substitute for thinking.

Sales tax is not something you can truly set and forget. But with the right expectations, software can make it manageable instead of overwhelming.

A practical way to think about economic nexus

Economic nexus is often treated as a bright-line rule in U.S. sales tax compliance. Cross a threshold, register, collect, file.

In reality, it is not a single rule. It is a decision-making framework with long-term consequences.

After the Wayfair decision, each sales tax state enacted its own version of economic nexus. While many states adopted similar headline thresholds, the similarities largely end there.

The differences matter because registration is not a one-time act. It creates recurring compliance obligations that continue even in periods with no taxable sales. Once registered, a business is committing to filings, recordkeeping, and exposure to notices, penalties, and audits.

This is why blanket advice like “register everywhere you have nexus” is often harmful for small businesses.

A thoughtful economic nexus approach requires context. It considers what is being sold, whether customers are taxable or exempt, how sales are routed through marketplaces, and how thresholds are calculated in practice. It also weighs the cost of compliance against the actual tax at issue, rather than treating registration as a purely moral or binary decision.

In practice, there are situations where a business technically meets a state’s economic nexus threshold, but the cost and administrative burden of registration materially outweigh the potential exposure. In those cases, the decision is not about ignoring the rules. It is about evaluating risk, timing, and proportionality.

Economic nexus should be treated as a risk management exercise, not a moral one.

When it comes to sales tax, the goal is not theoretical perfection across every jurisdiction. The goal is informed, defensible decision-making that aligns with a business’s size, risk tolerance, and growth plans.

For small businesses, fear-driven compliance decisions often create more problems than they solve. Clarity comes from understanding how the rules actually work, when registration is truly required, and what obligations follow.

Economic nexus is not about registering everywhere.
It is about knowing when registration makes sense and why.

Why “economic nexus” sounds simple but isn’t

Economic nexus is often explained as a simple rule: once you cross a sales threshold in a state, you must register and collect sales tax.

That explanation is incomplete and often misleading.

There is no single economic nexus standard in the United States. There are dozens.

States differ on:

• Revenue thresholds

• Transaction thresholds

• Measurement periods

• Types of sales included

• When registration and collection must begin

Some states look at gross sales. Others look only at retail or taxable sales. Some include exempt sales. Others do not. Marketplace sales may count toward thresholds in one state and be excluded entirely in another.

Timing matters as well.

In some states, registration is required immediately upon crossing the threshold. In others, collection begins on the next sale, the next month, or the following year.

This means two businesses with identical revenue can have completely different obligations depending on what they sell, who they sell to, and how their sales are structured.

This is also why software dashboards and high-level nexus summaries can be misleading. A simple “yes or no” indicator does not capture whether registration is actually required yet, or whether delaying registration is permissible under state law.

Economic nexus is not a single trigger.
It is a moving target.

For small businesses, this creates constant uncertainty. A shift in customer mix can alter how thresholds are calculated. A change in marketplace activity can shift liability entirely. A single large sale can suddenly change compliance obligations.

I have had multiple clients message after closing a major deal, worried less about celebrating and more about whether it triggered nexus. Not exactly the follow-up most business owners hope to be having after a great sales day.

Understanding economic nexus requires context, not just numbers. And for many businesses, that context is what makes compliance far more difficult than it first appears.

What the Wayfair Ruling actually changed for online sellers

Before 2018, sales tax obligations were largely tied to physical presence.

If a business had an office, warehouse, employees, or inventory in a state, that state could require the business to collect sales tax. If it did not, the burden technically fell on the customer through use tax, which was rarely enforced in practice.

That framework changed with the Supreme Court’s decision in South Dakota v. Wayfair.

The Court eliminated the physical presence requirement and allowed states to impose sales tax obligations based on economic activity alone. This concept is known as economic nexus.

In theory, the ruling was meant to modernize the tax system and level the playing field between online sellers and brick-and-mortar retailers. In practice, it shifted enormous administrative responsibility onto businesses that had never dealt with multistate sales tax before.

After Wayfair, states moved quickly to enact their own economic nexus laws. While the Court suggested that small businesses should be protected by safe harbor thresholds, it did not require states to adopt uniform rules.

The result is a patchwork of laws that differ by state.

Thresholds vary. Measurement periods vary. Definitions of what counts toward those thresholds vary. Registration timing varies.

For many small and mid-sized sellers, Wayfair did not just create new tax obligations. It created continuous monitoring obligations.

Every sale now carries the potential to trigger new compliance requirements in a state the business has never registered in before.

I’ve written previously about Wayfair’s unintended consequences for small remote sellers. What has become clear in practice is that the ruling exposed businesses to the full complexity of the U.S. sales tax system at scale.

Wayfair did not simplify sales tax.

It multiplied exposure to it.

Why U.S. Sales Tax is the most complicated consumption tax in the world

If you sell into the United States, you are dealing with one of the most fragmented consumption tax systems in the world.

This is not because sales tax is inherently complex.
It is because of how the system is structured.

The U.S. does not have a national sales tax. Instead, sales tax is administered at the state level, with additional layers imposed by counties, cities, and special taxing districts. Today, there are 46 separate state sales tax regimes and more than 12,000 unique taxing jurisdictions.

Each jurisdiction can independently determine:

• What is taxable

• What is exempt

• How tax is calculated

• When tax must be collected

• How and when returns must be filed

Rates are not the real problem. Rates are relatively easy to automate.

The real problem is lack of uniformity.

A product that is taxable in one state may be exempt in another. Shipping may be fully taxable, partially taxable, or exempt depending on the destination. Digital goods, SaaS, services, and bundled transactions are all treated differently across states, often with subtle distinctions that materially affect compliance. Sales tax exemption forms are handled differently across states.

There is also no centralized administration.

Businesses must register, file, remit, and respond to notices separately in every state where they are required to collect tax. Each state operates its own portal, uses its own forms and terminology, and enforces compliance differently.

Globally, this is unusual.

Most countries administer consumption taxes at the national level. Even when rates vary by region, the underlying rules are consistent. Businesses learn one system and apply it everywhere.

In the U.S., remote sellers must learn dozens.

This structural complexity existed long before e-commerce. But it became unavoidable after the 2018 Supreme Court decision that expanded states’ authority to require sales tax collection from out-of-state sellers.

If you want historical context on how we got here, I’ve written about that separately in A Brief History of U.S. Sales Tax. What matters today is this: the system small businesses are expected to comply with was never designed for modern interstate commerce.

Sales tax complexity is not about rates. It is about fragmentation, inconsistent rules, and decentralized enforcement.

Understanding this structural reality is the foundation for every sales tax decision that follows.

Wayfair’s unintended consequences: compliance challenges for small remote sellers

To mitigate the impact on small remote sellers, the federal Wayfair ruling required states to include a safe harbor provision in their sales tax laws. These provisions are meant to lessen the compliance burden by exempting businesses that fall below certain thresholds—typically based on sales volume or transaction count, like $100,000 in sales or 200 transactions—from the obligation to collect and remit sales tax.

While this was a step in the right direction, the varying safe harbor thresholds and requirements across states have created an overwhelming burden for small remote sellers. They must first determine where they have economic nexus based on the 46 different safe harbor provisions and then navigate the various requirements related to registration, return filings, notice responses, and audits.

Sales tax compliance in this environment is highly complicated, costly, and stressful for small remote sellers. Unlike large corporations with dedicated tax teams, these small businesses often lack the resources to confidently comply with the myriad state tax laws. Many small remote sellers who decide to pursue compliance turn to software solutions and external consultants, while others attempt to handle compliance in-house, often with less favorable outcomes.

Managing Sales Tax Compliance as a Small Business

If you’re a small remote seller, here are a few strategies to manage compliance more effectively:

1. Evaluate Software Solutions: Look for sales tax software that can automate calculation and reporting to ease (though not replace) the compliance process.

2. Consult an Expert: A sales tax consultant can help you understand nexus thresholds and manage filings across states, saving time and reducing the risk of errors.

Six years after the Wayfair ruling, challenges for small remote sellers persist. The ruling, while addressing inequities for local businesses, has inadvertently created barriers to small business creation, growth, and entrepreneurial spirit. Non-compliance—whether intentional or unintentional—poses a high risk, and many small sellers are increasingly anxious about potential audits in the coming years.