Welcome to Anrok’s annual sales tax and VAT review, where our team of tax experts breaks down the year’s most important developments affecting fast-growing digital businesses.
2024 marked another year of significant evolution in digital taxation globally. With Louisiana and Vermont both taxing SaaS for the first time, governments continued expanding their efforts to capture revenue from the rapidly growing software sector.
This year saw notable shifts at every level of government: US states enacting new legislation, cities proposing significant rate increases, and international authorities advancing reporting requirements. These changes underscore both the growing complexity of digital tax compliance and its increasing strategic importance for companies selling digital products worldwide.
The bottom line
Here are the top changes you need to know from 2024:
- Louisiana and Vermont became the latest US states to tax SaaS, while more states like Virginia are actively reviewing their digital tax policies.
- The EU finalized its ViDA package implementation plans, confirming mandatory e-invoicing requirements for cross-border sellers by 2030.
- Major markets reformed their VAT systems, with South Africa proposing B2B changes for 2025 and Brazil approving a transition to dual VAT starting in 2026.
- Some states moved to streamline their administrative requirements, with Wyoming, North Carolina, and Indiana eliminating their transaction thresholds for remote sellers.
- Chicago passed major increases to taxes on some digital products, with its cloud computing tax rising to 11% and streaming services to 10.25%, while other jurisdictions explore new revenue sources.
Line items
1. Louisiana and Vermont start taxing SaaS products
The brief: Vermont began taxing SaaS products, effective July 1, 2024, while Louisiana passed comprehensive reform in December that extends taxability to SaaS and other digital products as of January 1, 2025. Meanwhile, Virginia’s legislature is actively reviewing expanding its sales tax base to digital goods.
The backstory: Vermont’s H.B. 887 expanded the definition of “tangible personal property” to include remotely accessed prewritten software as of July 1st, effectively repealing the state’s 2015 SaaS exemption. In late November, Louisiana’s legislature passed H.B. 8 and H.B. 10 in a special session as part of broader tax reform, extending taxability to SaaS and subscription digital goods while providing certain B2B exemptions. The bill was signed by the governor in early December and takes effect on January 1, 2025.
In October, Virginia’s Joint Subcommittee on Tax Policy met to review modernizing the Commonwealth’s sales tax structure, with a focus on adapting to shifts in consumer spending toward services and digital goods. This followed Virginia’s failed attempt earlier in 2024 to pass digital goods legislation, signaling ongoing legislative interest in capturing this revenue.
The bottom line: As states continue modernizing their tax systems, digital products like SaaS remain a primary target. Companies should monitor state legislative sessions closely in 2025, particularly in states that have previously attempted to expand digital taxation. When new legislation passes, businesses often have limited time to implement compliance processes before effective dates.
2. EU approves e-invoicing mandate for cross-border sellers
The brief: The EU finalized implementation details for its ViDA package, confirming mandatory e-invoicing requirements for cross-border business by 2030 while expanding One-Stop Shop eligibility to simplify VAT compliance.
The backstory: In November 2024, the Economic and Financial Affairs Council approved the final version of the VAT in the Digital Age (ViDA) package, a major reform of EU VAT rules that sets a clear path for modernizing EU VAT administration. The package will allow more businesses to register and file VAT through a single EU portal, while mandating e-invoicing for cross-border transactions. Earlier proposals that would have created new tax collection obligations for ecommerce platforms were dropped from the final version.
The bottom line: While major EU reforms don’t take effect until 2030, companies should begin evaluating their systems and processes now to ensure they’re prepared for these significant changes to EU VAT administration.
3. South Africa proposes B2B reverse charge for foreign sellers
The brief: Multiple countries updated their VAT rules for nonresident sales of digital products in 2024. Most notably, South Africa proposed shifting nonresident sales of B2B digital services to reverse charge in April 2025.
The backstory: South Africa proposed adopting a reverse charge mechanism for nonresident digital businesses, similar to that of the EU and other countries, effectively shifting the responsibility for VAT to the local business customer. The change, which would go into effect starting April 2025, would end VAT registration requirements for many nonresident businesses. The draft also broadens the interpretation of taxable electronic services, removing the previous “minimal human intervention” requirement.
Other countries introduced new VAT requirements for non-resident suppliers of digital services: Laos as of August 1, Peru as of December 1, and the Philippines as of June 2025 (pending final approval).
The bottom line: These reforms signal a global shift toward modernized VAT systems, with implementation schedules stretching several years. Companies operating internationally should review their VAT obligations in these markets and prepare for significant procedural changes.
4. US states streamline tax administrative requirements
The brief: US states took significant steps to simplify tax compliance processes while maintaining robust collection frameworks. Wyoming, Indiana, and North Carolina are the latest states to remove their transaction count thresholds for remote sellers, while Pennsylvania and Georgia focused on modernizing their administrative processes.
The backstory: H.B. 197 in Wyoming, H.B. 228 in North Carolina, and S.B. 228 in Indiana removed their 200-transaction thresholds for economic nexus for remote sellers, leaving only a $100,000 sales threshold. This shift acknowledges that transaction counts often created unnecessary compliance burdens for smaller sellers without generating significant revenue. Pennsylvania signed legislation revising its tax appeals process, introducing formal settlement conferences to streamline dispute resolution. Georgia passed a measure to create a dedicated tax tribunal, aiming to expedite tax cases that previously went through standard courts.
The bottom line: These changes reflect states’ growing recognition that complex administrative requirements can hinder compliance. Companies should review their nexus determination processes in light of simplified thresholds, while preparing for more efficient administrative interactions with state tax authorities.
5. Chicago targets software with tax rate hikes
The brief: Chicago passed significant increases to its digital service taxes, with cloud computing tax rise to 11% and streaming services to 10.25% as of January 1, 2025. As a home-rule city, Chicago’s unique tax regime affects remote sellers of digital products even where the state of Illinois does not.
The backstory: Faced with a $1 billion budget deficit, Mayor Brandon Johnson proposed a major tax update for the 2025 budget, aiming to generate $128 million in additional revenue. The new budget was passed by the Chicago City Council on December 18th. The approved package increases Chicago’s personal property lease tax on cloud computing from 9% to 11% and its amusement tax on streaming services from 9% to 10.25%, effective January 1, 2025. These taxes, imposed under Chicago’s home-rule authority, apply to remote sellers of digital products that meet a certain threshold of sales volume in the city—regardless of physical presence, creating compliance obligations that extend beyond Illinois state requirements. The City Council’s finance committee is voting on the increases in December.
Meanwhile, other jurisdictions explored different revenue streams: Minnesota implemented a $0.50 retail delivery fee on transactions over $100, while several states expanded their excise tax frameworks, including California (firearms), Colorado and Maryland (tobacco), and Mississippi and Utah (alcohol). These changes demonstrate jurisdictions’ willingness to look beyond standard sales tax mechanisms to generate revenue.
The bottom line: These changes signal a broader trend of states exploring innovative tax mechanisms. Companies selling digital products should monitor both state and local tax developments, as city-level requirements may create unexpected compliance obligations even in states without digital taxes.
Forecasting
In 2025, governments around the world will continue evolving their tax legislation to keep pace with digital innovation. Here are some of the top stories to watch as we head into the new year:
- More states are likely to follow Vermont and Louisiana’s lead in expanding their digital tax base. Following the Supreme Court’s reversal of the longstanding Chevron standard earlier this year, requiring courts to exercise independent judgment on agency interpretations, states must seek clear legislative authority rather than relying on administrative guidance. This shift could accelerate legislative activity as states work to modernize and clarify their tax codes.
- State tax enforcement faces growing resource constraints. Texas announced it is 100 auditors short of desired staffing levels, while other states report similar challenges. This personnel shortage, combined with increasing digital commerce complexity, may drive more states toward automated compliance systems and third-party data reporting requirements.
- The pending Maryland digital advertising tax cases will reach critical decisions in 2025. The court is reviewing challenges from Meta, Apple, and others questioning whether digital advertising can be taxed differently than traditional advertising under the Internet Tax Freedom Act, which prohibits discriminatory taxes on electronic commerce. These decisions will inform whether digital ads can be taxed at higher rates than traditional advertising and potentially open the door for similar taxes in other states.
- Cross-border tax compliance is poised for significant transformation. While the EU’s ViDA e-invoicing mandate targets 2030, tax authorities are already exploring blockchain, AI and other technologies to enable real-time transaction visibility. Early adopter countries in 2025 could demonstrate how these tools reshape enforcement capabilities. However, new regulations like New York’s LOADinG Act limiting state agencies’ use of AI could create tension between automation and oversight, potentially reshaping how tax authorities modernize their enforcement capabilities.
- The trend of marketplace tax collection obligations continues to evolve globally, with Japan and Switzerland implementing new platform collection frameworks while other jurisdictions refine existing requirements. More countries are likely to follow the US and EU model of making marketplaces the responsible party for tax collection on platform sales, creating new compliance challenges for platform operators.
- The definition of taxable “digital services” continues expanding beyond traditional software and SaaS. States and countries are analyzing emerging technologies like AI services, data marketplaces, and virtual goods. This classification challenge may drive new frameworks for categorizing and taxing digital commerce.
The tax landscape in 2025 presents finance leaders with complex challenges: expanding digital tax obligations, evolving compliance requirements, and shifting enforcement mechanisms. Success requires regular monitoring of state and international developments, scalable compliance processes that can adapt to new requirements, and clear documentation of tax positions as courts take a more active role in interpretation.
These challenges are significant, but they’re not insurmountable with the right partner. Anrok’s team of tax experts can help you navigate this evolving landscape and build a robust compliance strategy for 2025 and beyond. Get in touch with our team to learn how we can support your business’s growth while ensuring compliance across jurisdictions.
