What Western States Can Teach Us About Sales Tax Trends
Western states—Alaska, California, Hawaii, Idaho, Montana, Oregon, Utah, Washington, and Wyoming—are often grouped together due to geography and historical ties. But culturally, economically, and even climatically, this region is anything but uniform. Few travelers would compare Hawaii’s lush beaches to Washington’s evergreen forests and find much in common. Still, in the world of sales tax, these states have recently shown parallel movement, revealing broader shifts in tax policy that extend far beyond regional boundaries.
In this article, we highlight recent trends across the West that reflect a national wave of change in economic nexus rules, digital taxability, and targeted exemptions. Whether your business is based in the region or simply sells into it, these developments signal the need to stay alert.
Economic Nexus and Threshold Reforms
Since the Wayfair decision in 2018, states have been adjusting how they determine when a remote seller must collect and remit sales tax. Many have done so by setting sales and transaction thresholds to establish economic nexus. Over time, however, states have begun refining those standards further and the West is very much part of that conversation.
After Washington and California eliminated their transaction count threshold in 2019, Wyoming followed in their footsteps by removing it’s 200-transaction threshold. House Bill 0197, signed in March 2024 and effective July 1, 2024, streamlined the requirement so that remote sellers are only required to collect tax once they exceed $100,000 in gross sales into the state. This aligns with a growing national preference to eliminate transaction-count criteria, which can disproportionately impact small sellers with a high volume of low-dollar sales.
Alaska followed suit, with the Alaska Remote Seller Sales Tax Commission voting to remove its 200-transaction threshold effective January 1, 2025. Like Wyoming, Alaska will now rely solely on a $100,000 sales threshold. This move is notable given that Alaska has no state level tax and only has local taxes that self-administer their taxes. More than 100 municipalities participate in a coordinated framework for remote seller tax collection. Utah was next in line, eliminating its 200-transaction threshold effective July 1, 2025 with Senate Bill 47. Idaho never included the transaction threshold in its economic nexus legislation leaving Hawaii as the sole western state to rely on this burdensome measure of economic nexus.
Elsewhere in the West, some states are refining rules to support small sellers without changing threshold definitions outright. Idaho, for example, passed House Bill 144, which creates an exemption for certain very small local sellers with limited activity in the state. The law, effective July 1, 2025, applies to businesses that:
- Is an Idaho resident,
- Have gross receipts under $5,000 in the current or prior year,
- Do not maintain a store, warehouse, or other physical presence in Idaho,
- Are not structured as corporations, LLCs, or partnerships, and
- Do not sell excluded products like motor vehicles, alcohol, tobacco, or goods purchased for resale.
These developments demonstrate a trend not just in the West, but across the country as states are revisiting post-Wayfair policies to reduce burdens on small businesses and make compliance more practical.
Digital Goods and Services: A Shifting Tax Landscape
As the digital economy expands, state tax systems are racing to keep up. Digital goods and services have become a focal point for lawmakers and revenue departments looking to modernize outdated statutes that once assumed all commerce happened in brick-and-mortar stores selling tangible goods
Washington has been particularly active in this space. Back in 2022, the Washington Department of Revenue ruled that providing access to store computer equipment in secure facilities, paired with internet connectivity, constituted a taxable service under the state’s Business and Occupation (B&O) tax. The ruling emphasized that even though real estate rental is generally exempt, licensing real property without granting exclusive control still creates a taxable event.
Fast forward to 2025: the state doubled down on digital taxability. Senate Bill 5814, signed into law on May 20, removed the “human effort” exclusion from the definition of digital automated services. This change means that more services delivered digitally, even those with primarily a human labor component, are now subject to sales tax if delivered via automated means. In addition, Washington joins Maryland in an attempt to tax digital advertising but excluding print, broadcast, billboards and live events.
On the same day, House Bill 2081 was also signed, increasing various B&O tax rates and introducing a substantial hike in the advanced computing surcharge, from 1.22% to 7.5%, effective January 1, 2026. These actions demonstrate Washington’s intent to generate revenue from the fast-growing tech sector.
Although these changes are specific to Washington, they reflect broader national developments. Across the U.S., states are expanding tax definitions to capture more revenue from digital transactions. While implementation details vary, the direction is clear: digital services that once sat in legal gray areas are increasingly falling within the scope of taxable activity.
Strategic Use of Exemptions
Tax modernization isn’t just about expanding obligations; it’s also about creating opportunities. Many states are leveraging exemptions and incentives to drive economic development, particularly in sectors like advanced manufacturing, clean energy, and infrastructure.
Utah enacted a new exemption effective July 1, 2025, covering amounts paid to operators of qualified energy storage manufacturing facilities. The goal is to foster investment in sustainable energy technologies, which has been an increasingly common legislative focus across states.
Wyoming extended its manufacturing sales and use tax exemption from December 31, 2027, to December 31, 2042. Long-term extensions like this offer predictability for companies planning major capital investments.
California, meanwhile, revised its Partial Sales and Use Tax Exemption for Research and Development in 2022. The amendment added electric power production, storage, and distribution to the list of qualifying activities. To reflect this change, California updated its exemption certificate form (CDTFA-230-M) to include checkboxes for electric power equipment and related tangible personal property.
Even Washington, known for aggressive enforcement in digital sectors, has provided guidance supporting the data center industry. Since 2010, the state has offered exemptions for server equipment and power infrastructure used in qualifying rural data centers, expanding to urban areas in 2022. In its latest update, Washington clarified how long these exemptions remain in effect based on factors such as:
- Whether the data center is rural or urban,
- The type of equipment involved,
- The construction commencement date, and
- Whether the claimant is the owner or a tenant.
In some cases, these exemptions now extend as far as July 1, 2048. While complex, the rules demonstrate how exemptions are being used not just for relief, but as tools to shape long-term economic development.
Preparing for What’s Next
The Western states may be vastly different in landscape and culture, but their recent sales tax policy shifts reveal a shared commitment to modernization. From streamlining economic nexus thresholds to redefining the taxability of digital services and using exemptions to spur innovation, these changes are shaping the future of tax compliance not just regionally, but nationally.
If your business operates in or sells into these states, staying informed is critical. The pace of change is accelerating, and proactive planning can help you stay ahead of costly compliance pitfalls.
Want to stay ahead of the curve? Use these resources to stay informed and up to date on key state-by-state rules, regulations, and developments that could impact your business: