The Virginia Legislature will consider several sales tax changes during its 2026 session; most notably, House Bill 900 would lower the state's retail sales and use tax from 4.3% to 4% while expanding the tax to cover digital personal property and digital services*. If passed, this bill would go into effect starting January 1, 2027 and the taxable digital products would include the following: digital codes**, digital subscription services***, software, digital audio and audiovisual products, and reading materials delivered electronically. Taxable digital services would include data storage, digital subscriptions, software applications, and website hosting and design. The bill would also add a new phrase – “digital personal property****” – to Virginia’s definition of tangible personal property. The bill is currently with the House and has not yet passed.

The bottom line: SaaS companies selling to Virginia businesses should monitor this bill closely. If passed, B2B digital services, digital subscription services, digital personal property, software applications, data storage, and website hosting would become taxable in January 2027, requiring updates to tax collection processes for Virginia customers.

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Terms

*Digital services refers to the following services: software application, computer-related, website hosting and design, data storage, and digital subscription.

**Digital codes means a code that permits an end user to obtain at a later date a digital subscription service, digital personal property, or both.

***Digital subscription services means a service, including audio and visual streaming services, that for a fee allows the end user to access and use software, reading materials, or other digital data or applications for a defined period of time, and which products the end user does not own or have permanent access to outside of such period of time.

****Digital personal property means property delivered electronically to an end user, including software, digital audio and audiovisual products, reading materials, and other data or applications, that the end user owns or has the ability to continually access, whether by downloading, streaming, or otherwise accessing the content, without having to pay an additional subscription or usage fee to the seller after paying the initial purchase price.

Mexico's tax authority (SAT) published new regulations requiring digital platforms to provide real-time access to their tax data. The amendments take effect April 1, 2026 and confirm digital platforms under Mexican digital services rules must grant SAT permanent online access to verify compliance. Platforms can choose the mechanism (system, interface, or app) they use to provide this access. SAT will publish detailed technical specifications in secondary regulations.

The bottom line: Platforms should prepare to implement a data-exposure layer between their internal systems and SAT rather than providing direct access to billing or ERP systems. Full technical requirements have not yet been published.

The Kentucky Department of Revenue issued guidance confirming that artificial intelligence software is classified as prewritten computer software for sales tax purposes. The ruling states that AI's ability to alter responses or generate output based on user data does not qualify it as custom software. All AI software applications must be treated according to Kentucky's existing definition of taxable prewritten computer software.

The bottom line: Businesses selling AI-powered applications, machine learning tools, or any software with adaptive capabilities should treat these products as taxable prewritten software in Kentucky. The state's position is clear: self-learning or adaptive features do not convert prewritten software into custom software for tax purposes.

Chicago Mayor Brandon Johnson refused to veto the city’s 2026 budget on December 23, 2025, thereby approving an increase to the Personal Property Lease Transaction Tax (PPLTT) from 11% to 15% effective January 1, 2026. This follows the previous increase from 9% to 11% that took effect January 1, 2025. The PPLTT applies to businesses that lease or rent personal property in Chicago, including cloud computing services, SaaS platforms, and software accessed remotely by Chicago customers.

The bottom line: Cloud service providers and SaaS companies operating in Chicago must update their tax collection systems before January 1, 2026 to reflect the new 15% rate. 

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The UK Treasury confirmed mandatory e-invoicing for all VAT invoices starting April 1, 2029, applying to business-to-business and business-to-government transactions. The government selected a decentralized 4-corner model, likely using the Peppol network, allowing businesses to exchange structured invoices through approved networks without a central government platform. Real-time reporting will not be required in 2029 but may be added later. Stakeholder collaboration begins January 2026, with a detailed implementation roadmap due at Budget 2026 in November. Paper invoices and PDF files will no longer qualify as valid VAT invoices.

The bottom line: UK businesses must assess their ERP and billing systems for Peppol and EN16931 compliance. The government estimates e-invoicing cuts costs by 60% to 80% and reduces late payments by 20%, saving small businesses approximately £11,300 annually.

Switzerland postponed its planned VAT rate increase from January 2026 to what is now most likely January 2028. The standard rate was set to rise from 8.1% to 8.8%. The 0.7% increase was designed to generate CHF 4.2 billion annually to fund a 13th monthly pension payment for retirees. The delay pushes the parliamentary approval deadline and required public referendum vote further into the future. ‍

The bottom line: Businesses operating in Switzerland now have additional time to prepare for the rate changes. Despite this postponement and a previous increase in January 2024 (from 7.7% to 8.1%), Switzerland continues to maintain the lowest VAT rate among major European countries.