1. 25 Jurisdictions now tax SaaS

As of 2025, SaaS is taxable in some form in 25 US jurisdictions, a 14% increase from 22 jurisdictions in the beginning of 2024. 

Louisiana and Maryland are the most recent states to enact laws allowing the taxation of SaaS businesses, taxing SaaS at 5% and 3%, respectively (Maryland now taxes SaaS sold to consumers at 6%). This adds to Vermont, which began taxing SaaS in July 2024, and Kentucky, which enacted SaaS taxation in 2023.

It’s worth noting that Virginia tried to expand sales tax to digital goods and services in 2025, but couldn't garner the necessary support. The question of whether or not to tax business-to-business sales of digital products proved a key point of contention, suggesting growing state interest in taxing B2B digital services. 

With approximately 50% of US states now taxing SaaS in some form, it’s becoming more complex than ever for B2B SaaS companies to track where they have nexus and support compliance. You can view the full list of sales tax by state and see where your product is taxable in our 2025 Sales Tax Index. 

2. Economic nexus thresholds are changing

Most states have economic nexus thresholds that trigger sales tax compliance requirements when breached (calculated based on total value in sales or number of transactions made into a given jurisdiction annually). Economic nexus only applies in states where a company doesn't have a physical presence (office, employees, etc.) but can be nuanced between states. 

In recent years, several states, including Indiana, Louisiana, North Carolina, South Dakota and Wyoming, have dropped the 200 transactions threshold, a trend expected to continue in 2026. This means that companies are obligated to collect and remit sales tax and file returns in a state as soon as they’ve hit the monetary threshold established by the state. 

Growing SaaS companies will need to be mindful of sales tax obligations as they scale their operations across new states. 

3. 408 sales tax rate changes, with audits ramping up

As sales tax requirements are becoming more complex, states are ramping up their audit activities, focusing on verifying that companies adhere to nexus laws and accurately characterize products and services in their compliance software. 

E-commerce, SaaS, and retail businesses are at an especially high risk of audits, as they often meet economic nexus thresholds in multiple states and may not be aware of their obligations in each one. 

In the first half of 2025, states made 408 sales tax rate changes, a 24% increase compared to the first half of 2024, suggesting that many state governments continue to grapple with the state of the economy and generating revenue. Notably, The California Department of Tax and Fee Administration (CDTFA) announced stricter enforcement measures in 2024, stating that businesses can expect to face increased audits and more rigorous scrutiny of sales tax filings. The CDTFA has also shared that they’ll be leveraging advanced data analytics to identify potential non-compliance and underreporting. 

4. The average cost of non-compliance is 4.3%

Non-compliant SaaS businesses lose 4.3% of revenue on average due to payment of uncollected sales tax, penalties, and fines. Digital businesses accruing tax compliance liabilities can reach even higher levels in major tech hubs, like New York, where the average is 11.3% of revenue, or Chicago, where it’s 10.6% of revenue. 

For a company with $10 million in annual revenue, non-compliance costs would translate to over $400,000 in annual liability exposure, not to mention the 25-30 hours per month in manual admin work that could have otherwise been spent on strategic initiatives. Furthermore, open audits can go further back than the states’ statute of limitations, especially in cases of fraud. Multi-year penalties can add up to millions, making historical exposure a significant risk for companies approaching M&A events.

5. Operational complexity scales exponentially with growth

As tax obligations multiply across jurisdictions, operational complexity is increasing exponentially as companies grow. 

Based on recent findings of our global sales tax benchmark report, the number of filings required per year increases 47x as companies progress from early-stage to enterprise: 

• Early-stage companies (<$1M ARR) report 2 filings per year across 1 jurisdiction
• Growth-stage companies ($5M-$10M) report 39 filings per year across 8 jurisdictions
• Enterprise companies (>$50M) report 100+ filings per year across 28+ jurisdictions

As companies have to manage more filings per year, automation becomes critical. Our research has revealed that for early-stage businesses at $5M-$10M ARR, 40 filings per year becomes unmanageable. For growth stage businesses at $30M-$50M ARR, 80 filings per year necessitates dedicated tax resources. And for enterprise businesses greater than $50M ARR, 90-150+ filings per year demands automation or significant headcount. 

The same research shows taxable revenue more than doubles as companies grow. 

• Early-stage companies, who have primarily US domestic sales, report 20% taxable at less than $1M annual revenue 
• Growth stage companies, who begin to expand to new geographies, report 37% taxable at $5M-$10M annual revenue 
• Enterprise companies report 47% taxable at greater than $50M annual revenue.
• Large scale enterprise companies, with annual revenue greater than $50M, report higher than 50% of revenue is taxable. 

6. International compliance is accelerating

International expansion is key for scaling. But growth-stage SaaS businesses should be aware that international jurisdictions are implementing new, sophisticated frameworks that eliminate traditional exemptions for foreign digital service providers, requiring non-resident providers to register, collect, and remit taxes as if they had physical presence. 

Sri Lanka now requires non-resident electronic service providers to register for and collect 18% VAT, quarterly filing requirements, effective from October 1st, 2025. And starting on June 1st, 2025, The Philippines implemented a 12% VAT on digital services for non-residents, with penalties up to 50% for non-compliance. And notably, The EU formally adopted the VAT in the Digital Age (ViDA) package on March 11, 2025, which will phase in e-invoicing requirements between 2026 and 2030. 

Companies can face 3-4 months of delay on international expansion when tax compliance becomes a bottleneck, limiting their ability to capitalize on market opportunities. 

Key takeaways

The sales tax landscape is continuing to evolve. For scaling businesses, proactive compliance has never been more critical. Here’s a recap of the six sales tax statistics to know going into 2026:

1. Approximately 50% of US states now taxing SaaS in some form, a trend that’s expected to continue
2. Economic nexus thresholds are changing, with numerous states dropping the 200 transactions threshold
3. There have been 408 sales tax rate changes in the first half of 2025, a 24% increase compared to the first half of 2024, and sales tax audits are ramping up
4. The average cost of non-compliance is 4.3% of revenue
5. Operational complexity scales exponentially as companies grow, with the number of filings required per year increasing 47x as companies progress from early-stage to enterprise. This makes automation critical for growing businesses. 
6. International jurisdictions are implementing new, sophisticated sales tax frameworks. Companies eyeing international expansion can face 3-4 months of delay when tax compliance becomes a bottleneck. 

To learn more about how you can use automation to streamline your compliance in 2026 and beyond, check out our new global sales tax benchmark report.