A Sneak Peek at the 2026 Sales Tax Outlook
It is no secret that the decisions businesses make today will shape their sales tax risk in 2026 and beyond. Given this long-term impact, it can feel overwhelming at times, as it’s nearly impossible to track every change in sales and indirect tax. However, these shifts in the tax landscape don’t appear overnight or without warning. The signs of what is to come are already emerging and here at the Sales Tax Institute, we pride ourselves on tracking those trends, so you don’t have to.
From the rapid expansion of digital tax policy to high impact legislative changes and increased compliance and enforcement activity, sales tax is in a state of change. Our expert roundtable brought perspectives from corporate tax, government policy, fiscal advocacy, as well as U.S. and global tax landscapes. With their broad experience and close watch on evolving developments, they know where the pressure points are forming.
Ahead of the webinar, our experts came together to discuss the questions businesses should be asking and to highlight the most significant trends influencing sales tax today. This article offers a first look at those insights and a preview of the changes that matter most as companies set priorities and build their compliance strategies.
What’s Putting Pressure on State Tax Reform in 2026?
“We’re seeing emerging fiscal pressures push states to adopt new revenue measures and different tax strategies. In some cases, that means expanding taxes on digital services and advertising — not just to address budget shortfalls, but to help replace traditional revenue sources like income and property taxes.” George Salis, Chief Economist and Senior Tax Policy Director, Vertex, Inc.
The erosion of state tax bases has been a long-standing concern, driven in large part by the transition from taxing tangible goods to taxing intangible ones, as well as services. You may not remember the last time you bought a DVD, but chances are you remember the last time you streamed a movie or watched content on demand. As consumer behavior has moved online, advertising dollars have followed, which creates new revenue streams that, until recently, largely sat outside state tax systems.
That reality is now reshaping policy discussions around the impact of digital goods taxation in 2026, as states explore digital tax expansion to keep pace with a changing economy. Maryland led the way with its digital advertising tax, and states such as Louisiana, Texas, Washington, and Illinois have followed by targeting areas like SaaS, cloud computing, and automated digital services that were once treated as out of scope.
As digital taxability evolves, experts caution that base expansion cannot be viewed in isolation.
“When we look at sales tax base expansion, it has to be viewed in the broader context of how businesses are taxed — not just in the U.S., but internationally. We tend to think of sales tax as a consumer-based tax, yet nationally about 42% of the sales tax base applies to B2B transactions. That reality invites comparison to much of the industrialized world, where value-added taxes (VAT) are the primary model. Any discussion of base broadening in the U.S. needs to be grounded in how the rest of the world approaches consumption taxes as well.” – Patrick Reynolds, President & Executive Director, Council On State Taxation (COST)
Taken together, these developments highlight that digital tax expansion is not simply about capturing new revenue streams; it reflects deeper questions about how consumption is taxed and who ultimately bears the burden. For businesses, understanding these structural shifts is essential to anticipating where states may look next as they rethink their traditional revenue sources.
Check out this blog for more information on how the digital tax net is expanding, including changes that went into effect on January 1, 2026.
Why Is Sales Tax Compliance Becoming More Complex for Retailers and Businesses?
“We’re seeing a growing number of bills emerge around penny rounding. There’s been a fairly broad consensus that, if rounding is allowed, it should occur at the end of the transaction after tax calculation and apply only to cash sales. The challenge for retailers is largely logistical — they may not always have pennies available to make exact change. One consistent principle we’ve seen is that the tax calculation itself should not change and should continue to be calculated to the nearest penny. That said, some states are beginning to explore approaches that move outside of those parameters.” – Patrick Reynolds, President & Executive Director, Council On State Taxation (COST)
The U.S. Treasury Department announced the phase out of the penny in May 2025, with the final one-cent coin made at the Philadelphia Mint on November 12, 2025. This decision, driven by the coin’s unsustainable production costs, may seem insignificant. However, it has introduced a host of technical headaches. In particular, it complicates the collection and reporting of taxes. States need to be consistent on their approach, or the burden significantly increases.
But penny-rounding is just one small piece of the inconsistencies in tax calculation. Another piece of the growing compliance puzzle is the addition of new fees, such as retail delivery fees.
“The thought of things like retail delivery fees becoming more widespread with a lack of uniformity is overwhelming, especially if it’s done on a local government level instead of a statewide one. When you start adding the boundary of a city, that really complicates things.” Scott Peterson, Vice President of U.S. Tax Policy and Government Relations, Avalara
A major part of creating your compliance strategy for these fees is keeping up with legislative changes, so your internal procedures and pricing can evolve alongside them. The Sales Tax Institute’s News & Tips page is a great way to stay informed about which states are implementing fees, as well as other developments in everything from audits and exemptions to industry-specific considerations. Click here to join the 18,000+ sales tax pros who get weekly sales tax tips.
Post-Wayfair Sales Tax Enforcement: What Should Businesses Expect?
“As we come up on the 8th anniversary of the South Dakota v. Wayfair decision and the states’ enactment of economic nexus, things continue to change. Some states have recognized the burden of the 200-transaction count threshold by eliminating this measurement, with Illinois being the most recent to do so on January 1, 2026. Audits are also increasing, and as AI becomes a more accepted and powerful tool, states are embracing the technology to identify unregistered or under-collecting taxpayers. There are still many businesses, particularly foreign sellers and B2B sellers, that didn’t think Wayfair and economic nexus applied to them. Efforts to create programs to help these businesses come into compliance are moving forward with Washington’s special VDA program for International Remote sellers launching February 1, 2026. Streamlined Sales Tax is also working on a special program. These efforts will significantly reduce the financial cost of non-compliance and also increase the number of taxpayers in compliance in each state.” Diane Yetter, President & Founder, Sales Tax Institute
When South Dakota v. Wayfair introduced economic nexus standards it enlarged the already massive web of tax regulations that came with physical presence. Now that economic nexus is undergoing it’s own evolution, businesses have yet another change in thresholds that they have to track. With the ever present threat of an audit looming, businesses are being pushed to refine their compliance processes faster than ever.
Thankfully, there are pathways to compliance that effectively limit risk. With Washington’s VDA program, available until May 31, 2026, businesses can reduce penalties, limit lookback periods, and resolve past liabilities. However, there are specific qualifications you must meet to be eligible, so it’s important to carefully assess whether or not you can apply. For assistance with the VDA process, reach out to Yetter Tax to speak with a trusted sales tax expert who will manage the full VDA lifecycle for you.
Preparing for What’s Next in Sales Tax
As 2026 unfolds, one thing is certain: the sales tax landscape will significantly impact your business operations.