July 2025 sales tax updates

Numerous state sales tax updates take effect July 1, 2025. Read on to learn about the new rates, exemptions, and rules that may impact your sales tax compliance in July 2025.

• Florida is providing new sales tax exemptions in 2025.
• Maryland is taxing many business services starting July 1, 2025.
• Mississippi is lowering its food tax rate July 1, 2025.
• Utah is eliminating its 200-transactions economic nexus threshold effective July 1, 2025.
• Tax rate changes are taking effect July 1, 2025, in more than 20 states.

Over the past several years, Florida has offered a sales tax holiday for disaster preparedness supplies and a “Freedom” sales tax holiday for admissions and outdoor recreation supplies.

With the enactment of House Bill 7031 on June 30, 2025, Florida is providing a permanent sales tax exemption for qualifying:

• Admissions charges and event tickets
• Fees for admission to state parks
• Disaster preparedness supplies 

Effective July 1, 2025, application software publishing services, data services, information technology services, and system software publishing services are subject to Maryland sales and use tax, at a reduced rate of 3%. This will likely affect many businesses. For instance, a Maryland-based business offering cloud storage may now need to collect the 3% tax.

If you’re not sure whether the sales tax applies to the services you buy or sell, look to the North American Industrial Classification System (NAICS). Maryland’s 3% tax applies to:

• Data or information technology
  • NAICS sector 518: Includes computing infrastructure providers, data processing, web hosting, and related services
  • NAICS sector 519: Includes web search portals, libraries, archives, and other information services
  • Subsector 5415: Includes computer systems design and related services
• System software or application software publishing services
  • Subsector 5132: Includes software publishing services

Businesses are advised to compare the services they provide to the NAICS activity descriptions defined by Maryland law as taxable services — but that’s just a starting point.

“The classification that a business reports as their primary business activity code for federal and state income tax purposes is not determinative of whether sales and use tax is imposed on sales of services by the business,” warns the Maryland Comptroller. “A business that has chosen a classification other than 518, 519, 5415, or 5132, but which sells a service described by those codes is required to collect and remit sales and use tax on the sale.”

That could prove challenging, from a tax compliance standpoint. Determining what tax rate to charge could also be difficult.

“Maryland law requires that if a different rate can be applied to a sale or use of a digital product or a taxable service, the higher rate must be applied,” explains the Comptroller. “To the extent that a sale of SaaS meets the definition of both a digital product and a taxable service when it is sold for use other than in an enterprise computer system, it is taxed at the higher rate. This means that SaaS sold for individual use is taxed at the 6% rate, and the same SaaS is taxed at the 3% rate when sold for use in an enterprise computer system.”

Maryland’s sales and use tax exemption for customized software or SaaS is also repealed as of July 1.

Beginning July 1, 2025, Mississippi is lowering the sales tax rate for groceries from 7% to 5%. Groceries are defined as food or drink for human consumption that’s eligible to be purchased with food stamps.

The reduced sales tax rate does not apply to prepared food, like restaurant meals or takeout.

Another big tax change in Mississippi is that starting July 1, 2025, third-party booking companies must collect Mississippi state and applicable local sales tax on any hotel bookings they facilitate. Charges or fees added as compensation for facilitating the transaction are also taxable. 

The hotel or property owner is not liable for state and local sales taxes collected by a third-party booking company.

Utah is getting rid of its 200-transactions economic nexus threshold. On and after July 1, 2025, remote sellers need only concern themselves with Utah’s $100,000 sales threshold — provided they don’t establish sales tax nexus through another means.

This move puts Utah in step with Colorado, Indiana, Louisiana, Washington, and the other states that have eliminated their economic nexus transaction threshold. See economic nexus threshold details for all states in our state-by-state guide to economic nexus laws.

Effective July 1, 2025, marketplace facilitators that facilitate the sale or rental of a seller’s property, product, or services must:

• Register with the City and Borough of Juneau (CBJ) Sales Tax Office
• Collect and remit Juneau sales tax and hotel bed tax on behalf of sellers

The CBJ gives Airbnb, Turo, Uber, and Vrbo as examples of marketplace facilitators. It also explains that online sales of goods may fall under the purview of the Alaska Remote Seller Sales Tax Commission (ARSSTC) rather than the CBJ.

There’s no state sales tax in Alaska, but more than 100 local jurisdictions levy a local sales tax. About 55 jurisdictions participate in the ARSSTC and require remote sellers with at least $100,000 in gross sales in the state annually to register with the ARSSTC then collect and remit applicable sales taxes.

Starting July 1, 2025, local occupancy tax applies to the first 30 days of occupancy in a Tennessee short-term rental (STR) regardless of the length of the stay. An STR marketplace must collect the local occupancy tax on those 30 days. If a person stays 31 days or longer, local occupancy tax doesn’t apply to day 31 or any subsequent days.

Through June 30, 2025, if a person occupies a short-term rental for 30 continuous days, the rental charge for those 30 days is exempt from local occupancy tax. An STR marketplace must refund or credit the tax previously collected from or charged to the guest.

South Dakota is suspending its tax collection allowance credit from July 1, 2025, until June 30, 2028. Prior to July 1, 2025, electronic filers could retain 1.5% of the gross amount of the tax due, to a maximum of $70 per return.

Many states offer vendor discounts for filing sales tax on time. Find more details in our state-by-state guide.

The Colorado retail delivery fee is dropping from 29 cents to 28 cents on July 1, 2025.

Arkansas, Mississippi, North Carolina, Tennessee, and Vermont are among the other states with notable tax policy changes taking effect July 1, 2025.

Arkansas and Mississippi are changing requirements related to direct-to-consumer (DTC) wine shipping. Arkansas is removing its on-site requirement, while Mississippi is allowing wine manufacturers to ship direct to consumers in the state for the first time.

North Carolina is implementing a new transportation commerce tax on ride services provided by taxis and transportation network companies (think Lyft and Uber). The tax rates are 1.5% of the gross receipts for an exclusive ride service, and 1% of the gross receipts for a shared-ride service.

Tennessee has a new tax on vapor products, a new exemption for wine sold on winery premises, and new sales and use tax laws related to uranium enrichment and nuclear energy production facilities. The Tennessee Department of Revenue offers more information.

Vermont is repealing the telephone personal property tax.

There are four sales tax holidays in July 2025.

• Alabama back-to-school sales tax holiday, July 18–20
• Mississippi annual sales tax holiday, July 11–13
• Puerto Rico back-to-school sales tax holiday, July 12–13
• Tennessee back-to-school sales tax holiday, July 25–27

Learn more about these and other tax-free events in our 2025 sales tax holidays blog post.

Tax rate changes take effect July 1, 2025, in the following states:

• Arizona
• Arkansas
• California
• Colorado
• Florida (indexed tax on asphalt)
• Georgia
• Illinois
  • General sales tax rate changes
  • Sales tax rate changes for aviation fuel
  • Motor fuel use tax rate changes
  • Municipal motor fuel use tax rate changes
• Indiana (gasoline use tax rate)
• Iowa
• Kansas
• Louisiana
• Maryland (various excise tax and fee increases)
• Michigan (new prepaid sales tax rates on gasoline and diesel fuel)
• Minnesota
• Missouri
• New Mexico
• North Dakota
• Ohio
• Oklahoma
• South Carolina
• Texas
• Washington
• West Virginia
• Wyoming (the severance tax rate on surface coal is also dropping, from 6.5% to 6%)

If you can’t get enough tax change news, read the Avalara Tax Changes 2025 midyear update. 

If you’re worried about keeping up with tax changes and curious to learn how sales tax automation can help, contact an Avalara tax expert.

This post has been updated. It was originally published on June 24, 2025.