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.

‍

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.

Alaska Governor Dunleavy introduced S.B. 227, a bill that would establish the state's first statewide sales and use tax on the retail sale of personal property and services. The proposed tax would apply seasonal rates: 4% from April through September and 2% from October through March. The legislation would adopt Multistate Tax Commission sourcing standards and authorize the Department of Revenue to join the Streamlined Sales Tax (SST) Agreement. The bill would also unify local tax bases with the state's framework and centralize collections. Pending Alaska's fiscal improvement, this statewide sales tax would expire in 2034.

The bottom line: Alaska is one of five states without a state-level sales tax and currently only some  of the state’s local jurisdictions impose a sales tax. This proposed tax would not preclude those local taxes. Therefore, it could potentially increase the combined rate for sellers of personal property and services. Businesses selling retail goods and services in Alaska will need to prepare for a new tax collection framework if the bill is passed. The seasonal rate structure adds complexity, requiring systems that can handle rate changes twice per year. Remote sellers should also monitor for economic nexus threshold updates. The bill also references AS 43.44.490, but that statute only addresses SST participation, not economic nexus. Currently, local jurisdictions enforce a $100,000 threshold through the Alaska Remote Seller Sales Tax Commission. The state may mirror this threshold, but details remain unclear.

‍

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.

Rhode Island's Division of Taxation issued a final decision ruling that online legal database subscriptions qualify as vendor-hosted prewritten computer software subject to 7% sales tax. The case involved a legal research company that argued its product was a nontaxable information service. The Division disagreed, finding that the search, retrieval, and research functionality customers use to access the database content meets the statutory definition of taxable software.

The bottom line: Rhode Island treats online database subscriptions with search functionality as taxable software sales, not exempt information services. If your company sells subscription access to searchable databases in Rhode Island, you should review your tax treatment of these transactions.

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. 

‍