Navigating 2025 Sales Tax Changes: Key State and Local Updates Every Ecommerce Seller Needs to Know

Key Takeaways

1. Economic Nexus Evolves: States like Alaska and New Jersey are adjusting economic nexus thresholds, simplifying compliance for smaller e-commerce sellers.
2. Key State Changes: California, Louisiana, and Illinois are rolling out significant updates, including revised penalties, new sourcing rules, and expanded tax bases for digital goods.
3. Local Tax Shifts: Over two dozen states are modifying local sales tax rules, underscoring the importance of staying informed across all jurisdictions where you do business.

E-commerce brands can sell their products and services anywhere, which is a blessing when it comes to moving products but a curse when it comes to complying with sales tax obligations. As your company grows and expands, you may find yourself owing sales tax in a growing number of states -- which creates more complications than you may have ever imagined. 

With each state -- and sometimes each county -- establishing its own rules for when you'll owe taxes, what products are taxed, and when you must file your forms and remit payments, managing sales tax obligations could quickly become a full-time job. And that's without taking into account that states can change their rules over time. 

Since your ability to avoid unpleasant surprises during an audit depends on how well you keep up-to-date on changing rules, check out this guide to 2025 sales tax changes that every e-commerce seller needs to know about. 

The basics of sales tax for e-commerce sellers

Before getting into the details of state sales tax changes for 2025, it's helpful to understand the basics of how e-commerce businesses are taxed. 

Before 2018, your business would be required to collect and remit sales tax in a particular state only if you met physical nexus requirements. This means that you had some type of physical presence in the state. 

That all changed on June 21, 2018, when the U.S. Supreme Court ruled on South Dakota v. Wayfair. 

In Wayfair, the court overturned the prior requirement that a physical presence was necessary, allowing states to impose sales tax requirements on companies with economic nexus. Under the new rules ushered in by Wayfair, if you have sufficient economic connections with a particular state, you're required to register your business, collect sales taxes on taxable products, and pay sales taxes on a set schedule. 

Once Wayfair became the law of the land, states across the U.S. began imposing rules governing when businesses established economic nexus. The laws created carve-outs for small merchants who didn't do much local business and established specific thresholds when states became responsible for complying with sales and use tax rules. These thresholds are typically based on either the number of transactions, the total amount of economic activity, or both.

The most common thresholds are typically $100,000 in sales and, or, 200 transactions per year. However, some states have much higher thresholds; for example, in New York, economic nexus is established with $500,000 in sales and 100 transactions, and in California, $500,000 in sales, regardless of the number of transactions.

Under the new regulatory regimes, e-commerce businesses are now required to know the rules in all 50 states that determine if they've established economic nexus. They are also required to collect sales taxes from buyers across the country who live in states where they do enough business. 

The impact on the typical e-commerce business was substantial. In a post-Wayfair world, a company that makes $5 million in sales is most likely registered in as many as 30 different states, if not more. That's a lot of different laws to keep track of.

States are simplifying the rules for sellers

Now you know the terrible news about the complex obligations Wayfair imposed on your business -- but there is some good news. Several states are adjusting their nexus thresholds and simplifying the rules for sellers. 

However, changes to the definition of economic nexus are just one of many modifications states are making this year. Multiple states across the country are also modifying their sales tax rules in other ways that could affect your tax obligations. 

Here are some of the most significant changes that are taking effect in 2025. 

• Alaska is eliminating the 200 transaction threshold for economic nexus. Under the new rules, you now establish economic nexus only if you have $100,000 in gross sales. These new rules will affect sellers doing business in the 100+ local jurisdictions charging sales tax in Alaska (there's no statewide sales tax). 
• California will permit the Department of Tax and Fee Administration to begin sending taxpayers electronic sales and use tax assessments and determinations. The state also revised the penalty for unremitted sales tax that has been collected. The new penalty is equal to the greater of $1,500 per month or 25% of the tax liability for the period when the tax was due. Under the previous law, the penalty was 40% of the amount not timely remitted. 
• Louisiana is restoring a 5% sales tax rate and will now tax more digital goods. This 5% rate is an increase from the temporary 4.45% rate that had been in effect.
• Kansas is now exempting groceries from the state sales tax. Some local taxes on groceries remain in effect.
• Kentucky is increasing the threshold at which qualifying service providers are subject to sales tax from $6,000 to $12,000. Qualifying providers who have less than $12,000 in gross receipts from enumerated services will no longer be required to register for sales tax or to maintain an active sales tax permit. 
• Illinois is now imposing taxes on leases or rentals of tangible personal property rented in the course of doing business. The state is also imposing new destination-sourcing rules, which require state and local sales tax rates to be calculated based on the rates effective in the location where the item is shipped, delivered, or where the purchaser takes possession. 
• Georgia is giving localities throughout the state the option to impose new local sales taxes to offset costs associated with new property tax relief programs.

These are the statewide changes that are taking effect. Other states are considering changes but have not yet implemented them. 

For example, a bill was introduced in New Jersey that would eliminate the 200 transaction threshold for establishing economic nexus, leaving in place only the $100,000 sales threshold. This is the exact change Alaska just made. If the proposed legislation is passed, New Jersey will join a growing number of jurisdictions that have made reforms reducing the burden of sales tax compliance on smaller merchants. 

Local sales and use tax rules have also been modified for 2025 in almost two dozen other states, including Arizona, California, Colorado, Florida, Georgia, Illinois, Iowa, Kansas, Louisiana, Michigan, Missouri, Nebraska, North Dakota, Oklahoma, Texas, Vermont, Washington, Wisconsin, and West Virginia. 

The sheer number of reforms demonstrates the complexity of sales tax compliance for e-commerce businesses. While some changes are intended to provide relief from administrative burdens, businesses are still left with the responsibility of monitoring legislative shifts in potentially dozens of jurisdictions where economic nexus has been reached. 

Keep up-to-date on sales tax rules

When you're running an e-commerce business, keeping up-to-date with sales tax rules and remaining in compliance with state and local regulations is a key part of effective operations. 

You don't want to find yourself facing audits, fines, and penalties because you fail to register when you're required to or because you fail to collect and remit the appropriate sales taxes.

There is help out there, including programs like Numeral, that manage your obligations for you, freeing you up to do other things while spending as little as five minutes a month on sales tax compliance. Numeral can track economic nexus, register your company when required, collect the necessary amounts, file your taxes for you, and even deal with correspondence from states. Numeral will also keep up to date on all these changes, so you don't have to. 

The key is to understand that you have these obligations and to find a solution that works for you. Just like finding the right e-commerce accounting software, like Finaloop, or payroll service provider, identifying the right tools to fulfill your sales tax burden can make running your online business a whole lot easier.