AVALARA TAX CHANGES 2025
Discover tax changes that impact compliance.
Keeping up with tax rule changes doesn’t have to be a grind. Our ninth annual Avalara Tax Changes report delivers insights on emerging compliance trends from tax professionals and Avalara experts to help you stay on top of your obligations.
Here’s a taste of what you’ll find
Emerging sales tax trends
Modernizing sales tax
The sales tax base is dwindling and sales tax rates are rising because state tax policies haven’t kept pace with changes in consumer behavior. States are responding in different ways.
Simplifying economic nexus
With Alaska chucking its 200-transactions threshold effective January 1, 2025, a total of 14 states have eliminated their economic nexus transaction threshold — and they won’t be the last. New Jersey has introduced a bill to get rid of its transaction threshold.
The e-invoicing tornado
More than 80 countries have e-invoicing mandates; others will likely adopt them soon. According to a recent billentis report, e-invoicing is entering a “tornado” — a phase of rapid and widespread adoption of new technology.
Insights from tax experts
Physical presence still matters
“Some of the most common physical presence we see in the companies we work with is inventory or remote employees … the applicability of physical nexus through these remote activities (inventory and remote workers) has exploded since 2020.”
- Diane Yetter
- Founder of the Sales Tax Institute
More retail delivery fees could be coming
“A retail delivery fee is a great way to raise revenue without raising taxes. It’s hard to raise the sales tax rate or expand the sales tax base, but it’s relatively easy to implement a retail delivery fee.”
- David Lingerfelt
- Senior Director of Indirect Tax at Avalara
Marketplace laws confuse lodging tax compliance
“The marketplace facilitator landscape lacks conformity. At the state level, there are at least 10 or more different naming conventions for ‘marketplace facilitators’ in the lodging industry.”
- Kelly R. Smith
- Director of Indirect Tax at Evolve Vacation Rental
Industry updates
Digital goods taxes are spreading
States continue to clarify how sales tax applies to software, digital goods, and digital services. At least one state will start taxing digital products in 2025.
States pull back on personal property tax
In January 2024, Wisconsin repealed its state tax on manufacturing personal property and as of January 1, 2025, Georgia is increasing its personal property tax exemption.
FUSF found unconstitutional
The Fifth Circuit Court of Appeals ruled the Federal Universal Service Fund is a tax, not a fee — and is unconstitutional. But, three other circuit courts determined it is constitutional. What could happen next in this telecommunications debacle?
Cocktails to go on the rocks
The District of Columbia and 29 states enacted laws to permanently allow cocktails to go; five states allow cocktails to go on a temporary basis. More changes could be served up in 2025.
States unplug EV tax credits
The phaseout of New Jersey’s sales and use tax exemption for zero-emissions vehicles is expected to generate $75 million in new revenue during the 2025 fiscal year.
Download the report
