The list: 5 hidden risks and how to fix them

By learning the common sales tax risks your organization may face, you can be better prepared to react appropriately to protect your business: 

1. The "remote employee" nexus trap

The first trap involves remote workers. Any remote employees you have can instantly create a physical-presence nexus in their home states, as outlined by the global cloud-based human capital management provider ADP, even if your company is below certain economic thresholds. This means that just a single worker can trigger multi-state registration, collection, and audit exposure. The best way to stay ahead of this trap is to maintain a live map of all employee locations, assess a new nexus before hiring into that state, and register proactively when a new presence is created. 

2. The usage-based pricing paradox

Usage-based or consumption-driven pricing can cause complications, blurring whether a charge is for SaaS, a taxable service, a digital good, a bundled transaction, or something else entirely. As states continue to expand the taxability of services and digital products, misclassifying usage fees can lead to under-collection issues. Misclassification can also work in the opposite direction, causing businesses to collect and remit sales tax when it is not actually owed, potentially creating customer refund obligations and compliance challenges. To avoid this, break down every charge type and ensure it aligns with state taxability rules. While many businesses choose to bundle fees to avoid exposing granular pricing details to customers, bundling can make it harder to accurately determine the taxability of each component. You should also reevaluate tax treatment whenever pricing models or billing structures change. Even small changes to how usage is measured or billed can have an impact on sales tax obligations.

3. The marketplace facilitator "false security"

Marketplace facilitator laws shift sales-tax collection onto platforms, but coverage will vary by state and product type. Facilitator errors, miscategorization, or incomplete reporting can still leave sellers exposed during audits. In some states, marketplace facilitators are also required to report marketplace sales on their own sales tax returns and then take a specific deduction for those marketplace transactions, making accurate reporting and reconciliation even more critical. You should confirm facilitator responsibilities in writing, reconcile platform reports with your own sales data, and verify product tax codes independently. Additionally, certain jurisdictions require sellers to maintain specific forms or documentation to substantiate the marketplace seller–marketplace facilitator relationship, and failure to retain these records can increase audit risk even when the facilitator is collecting the tax.

4. The "zombie" exemption certificate

Outdated, expired, or incomplete exemption certificates remain one of the most common audit triggers. If a valid certificate is not held on file, states will treat the sale as taxable, typically retroactively, regardless of customer claims. Additional risk can arise when an exempt customer is acquired or undergoes a legal entity change. In these cases, exemption certificates may need to be updated to reflect the new entity, even if the acquiring company is also exempt. Centralizing certificate management, validating completeness, correctness, and expiration dates, and implementing automated renewal workflows can help put a stop to this issue early on. If the acquiring entity is not exempt, previously valid certificates may no longer apply, yet seller systems may continue exempting transactions based on outdated records, creating hidden exposure over time.

5. The "digital goods" definition drift

States continue to broaden and redefine what counts as taxable digital products. As a result, there are often inconsistent rules governing downloads, SaaS, streaming, and cloud-based tools. Outdated product classifications are an issue, as they can lead to multi-state tax gaps. You should conduct regular digital-goods taxability reviews, monitor regulatory updates, and clearly separate digital and physical items during the checkout and invoicing process. 

Small overlooked details can cost big

These aren’t merely academic exercises. Real e-commerce businesses are constantly being audited, facing assessments, or accidentally writing off material revenues because of outdated assumptions. Considering that many sellers nowadays have some sort of physical presence in many states, whether from inventory storage or remote employees, that were never accounted for, tax slip-ups are easier. As your business scales, or as you expand geographically, do your tax-compliance obligations. By uncovering hidden risks early, you can enjoy a clean audit instead of a multi-state penalty fire drill.