Washington state lawmakers have passed a bill requiring ad agencies to collect sales tax on digital advertising services. If approved, the bill (SB 5814) would force agencies in Washington to collect 7.5% to 10.6% sales tax when providing services like creating digital ads, analyzing performance, or planning online campaigns. 

The bottom line: Most states don’t tax digital advertising services yet. In recent years, as digital ad revenue has grown, states have explored specialized digital ad taxes based on gross receipts rather than traditional sales taxes. Washington’s bill could become influential, as the state’s tax policies (which often reflect input from major tech companies) have previously set precedents for other states expanding into digital taxation.

South Africa canceled its planned VAT increase following political opposition. The proposed 1% increase over two years, aimed at raising government revenue, faced resistance as the country struggles with slow economic growth and rising living costs. 

The bottom line: South Africa’s VAT rate will remain at 15%. The country’s finance ministry stated that no immediate alternative revenue sources will replace the canceled VAT increase.

Finland has proposed a 0.5% VAT rate reduction in the country’s mid-year budget discussions. The VAT rate would drop from 14% to 13.5%, and this change would go into effect on January 1, 2026. 

The bottom line: Finland recently made additional updates to the country’s VAT rate. In September 2024, the country increased its standard VAT rate to 25.5%. Finland’s finance minister implemented this tax increase to comply with the Euro currency membership requirement that government deficits cannot exceed 3%.

Sri Lanka has introduced official VAT rules for non-residents, effective October 1, 2025. VAT will be applied to services supplied by non-resident businesses through electronic platforms to persons in Sri Lanka. 

The bottom line: The country’s commissioner-general will release details on registration, payment, and compliance procedures soon, but income from the following services are likely to be liable to VAT collections: streaming music and video, apps, images, online gaming, automated e-learning, search engines, online advertising, SaaS or cloud-based software, and ride and home sharing apps.

Effective July 1, 2025, Utah will eliminate its 200-transaction economic nexus threshold for remote sellers. Currently, remote sellers must register for Utah sales and use tax if they generate over $100,000 in gross revenue from Utah or complete 200+ transactions in Utah.

The bottom line: Utah is following the Streamlined Sales and Use Tax Agreement's initiative to eliminate transaction thresholds. Transaction thresholds can be a burden for small sellers struggling with low-dollar transactions, and managing the 200-transaction threshold can be expensive for states to manage.

The Washington Department of Revenue has issued new guidelines on when companies can apply the state’s multiple points of use (MPU) sales tax exemption to sales of software maintenance agreements. A software maintenance agreement may qualify if (1) the software can be used both inside and outside of the state of Washington simultaneously, (2) if any included services directly support the software being offered, and (3) the agreement does not include any other taxable items.

The bottom line: Software companies can now exempt their bundled maintenance agreements from Washington sales tax when customers use the software across multiple states, creating substantial savings on multi-state transactions.

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