Mastering New Sales Tax Changes 2025: Your Complete Guide

As an eCommerce entrepreneur who sells online, you should learn about the recent changes in your sales tax, especially if you’re operating in various jurisdictions. Unfortunately for businesses, states often change their sales tax rates and update compliance requirements. They may modify nexus rules or introduce new exemptions.

That’s why you should vigilantly review these updates to avoid legal issues and financial penalties. This blog covers 2025 sales tax updates in detail. Here’s a brief overview of the changes that you should expect:

• New Rates: Sales tax rate changes directly affect pricing strategies and profit margins. If you don’t collect the right amount in taxes, your business may end up underpaying or overpaying sales tax. This’ll lead to fines and audits against your company.
• Nexus Rules: The term “nexus” simply determines if your business has an obligation to collect sales tax in different jurisdictions or not. Now, you may start collecting sales taxes for states where you don’t even have a physical presence.
• Tax Exemptions: Find out which products/services qualify for exemptions. That’s how you can ensure compliance when it comes to filing sales tax. If your business ends up misclassifying something, it’ll lead to major liabilities for you, such as audits or fines. Also, misclassification stops you from collecting taxes on taxable items. That’s why it’s vital to understand the new sales tax rules 2025.

Why Do Sales Tax Changes in 2025 Matter?

As we expect the new government to potentially introduce a nationwide retail sales tax, businesses have to be careful about the implications of these taxes on their operations. How will these new taxes affect their financial health and operational strategies? Let’s look into the vital role sales tax changes play in making or breaking your profitability:

Financial and Operational Impact

States often adjust sales tax rates to address budget deficits and inflation. However, it makes businesses suffer from higher tax obligations.

In 2024 alone, more than 500 local sales tax rate changes took place (Reference: Stripe.com).

We’re expecting a similar number of state sales tax changes in 2025. It’ll increase the overhead costs for businesses. Also, they have to worry about the economic nexus as well.

Lastly, states are reassessing which items are taxable or not. So, it’ll cause major shifts in compliance requirements. Data sourced from industry reports, including marketplace.org, has revealed that some states have reduced sales taxes while others have eliminated them altogether when it comes to groceries.

Importance of Understanding New Laws

You should also be mindful of sales tax changes in 2025 to avoid penalties. Not complying with the latest sales tax regulations will lead to hefty fines and other legal repercussions. Companies not keeping up with these updates are risking audits and penalties, affecting their bottom line.

Similarly, business owners must stay informed about upcoming changes. This way, you can plan your operations and financial strategies strategically, such as:

• Pricing models
• Budgeting for potential increases in tax liabilities
• Optimizing compliance procedures

Keep in mind that you can reduce your overall tax burden by learning about tax cuts, favorable rates, new exemptions, and other things. Let’s say you know which items are exempt from sales tax in 2025. You can use this foreknowledge to price your goods more competitively and stay compliant with your state’s new taxation regulations.

Key Sales Tax Changes for 2025

New Sales Tax Rates by State

Many local jurisdictions in Illinois are adjusting their sales tax rates. Here are some examples of these changes:

• New Sales Tax Rates: In many states and jurisdictions, sales tax rates will increase in 2025. For instance, Altona’s rate will increase from 7.75% to 8.75%. Many regions in the state of Illinois will also see an increase of 0.25% to 1.50% in 2025.
• Economic Nexus Threshold Updates: The state of Alaska has announced the removal of the 200-transaction threshold; NJ is considering doing the same. California maintains a threshold of $500,000 in gross annual sales or 100 transactions.
• Tax-Exempt Good and Service Changes: In Oklahoma, the state has made the sales tax rate 00.00% on groceries and other food items (August, 2024). On the other hand, the state of South Carolina passed a bill to exempt period and other feminine hygiene products from taxation in May 2024.New York continues to exempt clothing and footwear priced under $110 from sales tax.

Consumers will face higher costs on certain items. It’ll affect their purchasing behavior and may cause a dip in overall sales for your business.

For instance, Louisiana plans to temporarily increase the sales tax rate on digital goods from January 1, 2025 to December 31, 2029; the tax rate will be changed from 4.45% to 5% during this 5-year period. So, if your business deals in digital goods in the Pelican State, get ready for this 0.55% sales tax rate increase.

Updates to Economic Nexus Thresholds

For sellers, economic nexus thresholds are of grave importance. These thresholds determine which sales volumes make it mandatory for your business to collect sales tax from consumers in different states.

For instance, Alaska is eliminating the 200-transaction threshold to establish the economic nexus, effective New Year 2025.

So, a company operating in the Last Frontier will only register when its gross sales exceed $100k in one calendar year. So, sales tax compliance 2025 will take a new form.

Here’s why tracking economic nexus thresholds are important:

• Legal Compliance: Keep in mind that you should make sure whether you’re complying with legal requirements or not as your state makes adjustments to the threshold.
• Sales Strategy: You should determine when, where, & how you’re establishing nexus. That’s how you can strategize your sales efforts the right way. Let’s say your business is approaching a threshold in a certain state. Can you adjust your pricing or marketing plan accordingly?
• Marketplace Sales: Many states include marketplace sales when calculating the overall nexus. If your business uses platforms like eBay or Amazon, you need to account for these to facilitate sales. That’s how you can decide if you meet the threshold or not.

Changes to Tax-Exempt Goods and Services

1. Food Products

Many states have started to give an exemption to food items when it comes to sales taxes. This way, the state plans to alleviate the financial burden on end consumers. We can see this trend on the rise in California and other states where grocery items get an exemption.

These states have an exemption:

• Florida
• Iowa
• Indiana
• Maryland
• Massachusetts
• Minnesota
• New Jersey
• North Dakota

2. Clothing

In many states, they’re going to implement sales tax holidays for clothing & apparel.

Virginia has reestablished its annual summer sales tax holiday, for instance.

So, consumers are buying wearable items without incurring sales tax during certain periods. Also, states like Tennessee are proposing changes in their sales tax holiday caps.

These states have an exemption:

• Minnesota (not for furs or accessories)
• New Jersey (only for clothing and footwear)
• Pennsylvania (not for fur coats or formal wear)
• Vermont (protective gear is still taxable)
• New York (up to $110 per item)
• Massachusetts (up to $175 per item)
• Rhode Island (up to $250 per item)

3. Medical Devices

The taxation of medical devices has suffered a significant change as well. Some states are going to expand exemptions for medical equipment used in healthcare settings. It’ll make healthcare more affordable for the citizens of these states. In Kentucky, the state has introduced a new exemption for data center equipment supporting healthcare technology.

Keep in mind that durable medical devices prescribed by a licensed healthcare professional fall under this category.

Some examples include:

• New Jersey
• New York
• North Dakota
• Rhode Island
• Vermont
• Virginia

4. Feminine Hygiene Products

Many states are criticized for “pink taxes,” i.e., taxes on feminine hygiene items & menstrual items. That’s why these states are considering enacting exemptions for these products.

For instance, South Carolina passed a law that exempted feminine hygiene products from sales tax.

Some examples are:

• Texas
• Virginia
• Rhode Island
• Pennsylvania (tampons and sanitary napkins)
• Maryland (where feminine hygiene products are as treated as medical necessities)

5. Digital Goods and Services

Some jurisdictions also want to include digital goods & services in their taxable base. They wish to convert certain exclusions into exemptions later on. This shift will impact companies selling digital products. As a business owner, you may have to adapt your pricing strategy to the new and updated sales tax laws.

Consider these examples and keep in mind that some states only consider digital goods delivered electronically:

• Missouri
• Massachusetts
• Oklahoma
• Virginia
• Nevada

Expansion of Marketplace Facilitator Laws

When it comes to sales tax compliance 2025, you must be mindful of how marketplace facilitator laws are expanding across the United States. In many states, facilitators like Amazon, eBay, Etsy, and others are now required to collect/remit sales tax for sellers using these platforms.

So, what does it mean for your business? As of today, every state where sales tax is collected also has marketplace facilitator laws. That’s because online marketplace sales will exceed $600 billion by 2027, accounting for one-third of all eCommerce transactions in America.

That’s why these new laws dictate that exceeding $100k in sales or 200 in transactions in a given year will obligate your business to collect sales tax on behalf of your sellers even if the sellers themselves don’t have any legal obligation to collect these taxes. At this point, you may wonder how 2025 sales tax updates are affecting sellers. Well, here’s what’s going to happen to sellers:

• This shift will go in a seller’s favor because they won’t have to worry about sales tax compliance; the marketplace will take on this responsibility (so, if you run a business on Amazon, these updates work in your favor).
• You’ll still be liable if your sales exceed certain thresholds or if the marketplace doesn’t collect the right amount in taxes. In other words, sellers will still have to stay vigilant and monitor the overall compliance status.
• Sellers will also have to adjust their pricing model based on how sales tax is applied through these platforms. It may cut into their profit margins and competitiveness.

State-by-State Breakdown of Sales Tax Changes

News reports suggest that sales tax will top 10% in many Louisianan regions in 2025 due to the new updates made to relevant regulations.

That’s why we’ll give you a breakdown of the most important state sales tax changes 2025 in the form of a brief table:

You should also check out sales tax changes 2024 in this article published by TaxCloud.

How TaxCloud Helps?

At TaxCloud, we keep business owners on top of ever-changing state-specific tax rates by making automated updates to our platform . Also, we cover exemption statuses across all jurisdictions in the United States. That’s how we keep you compliant without the burden of manual tracking or constant monitoring of state laws.

If you want to prepare for sales tax changes in 2025, here’s what you need to do.

How to Prepare for Sales Tax Changes in 2025?

If you want to ensure sales tax compliance 2025, this is what you should do.

If you’re a small online business owner managing sales tax on your own, review the revenue rules in the states where you sell to confirm your sales tax compliance for 2025 you can find that information on the official websites. If you work with a CPA, consult them about upcoming changes. If you use a platform like TaxCloud, chances are you’re already covered.

You may face different & unique challenges when it comes to sales tax change preparation. For instance, manually tracking your sales tax can lead to errors. It’ll increase the administrative burden on you, and you may face penalties for miscalculating your taxes.

Don’t forget to automate solutions when you want to streamline the sales tax process.

Also, ensure that you’re calculating these taxes correctly by using automation. That’s why we recommend TaxCloud to all businesses worried about sales tax changes.

Simplify Compliance with TaxCloud

So, how does TaxCloud help you in this regard?

To put it simply, TaxCloud automatically adapts to sales tax changes. It ensures that you are compliant in all jurisdictions – and keep in mind that TaxCloud lets you file your sales taxes in all 13,000+ US jurisdictions with 100% accuracy.

Also, TaxCloud will apply these changes based on your product’s TIC code for added compliance. It has many amazing features like real-time updates, nexus tracking, multi-state compliance, and much more.

So, say no to manual filing and save hours each month by doing it all automatically. No more errors or time-consuming filing for you! Use TaxCloud’s 30-day trial offer right now.

Also, you should understand local tax rates and sales tax trends. Be mindful of which areas are affected by product taxability changes. Get a sales permit, learn about tax provisions, know about your business tax code, and get ready for FY2025.

Final Thoughts

The crux of the matter is this: You should get ready for sales tax changes in 2025. Understand what’s changing and how it’ll affect you.

Don’t forget to utilize automation for simplifying the art of compliance. This way, you can reduce the risk of errors and mistakes. In the end, feel free to get started with the 30-day trial of TaxCloud and stay ahead of the new sales tax rules 2025.