The New Sales Tax Playbook: Tax Rate Increase or Broader Base?

2026 is shaping up to be a year of sales tax modernization under fiscal pressure.

After 2025 produced 681 sales tax rate changes and 335 new city, county, and district taxing jurisdictions, it’s not a stretch to expect more of the same. States are navigating slower revenue growth, persistent spending obligations, and a fair amount of economic uncertainty—all while trying to avoid politically unpopular tax overhauls.

But this isn’t just a story about a tax rate increase.

States are also widening the playing field—expanding what’s taxable, empowering local jurisdictions, and leaning heavily into digital and service-based taxation. For ecommerce sellers and service providers, that means the rules aren’t just changing, they’re multiplying.

Let’s unpack what’s actually happening, and how to stay ahead of it.

Why Are Sales Tax Rates Rising?

At first glance, state sales tax rates appear relatively stable. As of 2026, the average state rate sits just above 5%, and in 2025, only one state—Louisiana—implemented a statewide rate increase.

So why does it feel like everything is getting more expensive (and more complicated)?

That’s because the real action isn’t happening at the state level. States are dealing with a classic fiscal squeeze: post-pandemic growth is cooling, while spending on healthcare, education, and infrastructure continues to rise. Instead of relying on headline rate hikes, they’re deploying less visible strategies:

• Expanding local sales tax rates
• Creating new special taxing jurisdictions
• Broadening the overall tax base

The result is a sharp increase in the number of rate changes, even if the average rate only inches upward. For consumers, these changes can be subtle. For businesses, they’re anything but. A multi-state ecommerce business handles potentially hundreds or thousands of rates. And every new district or local jurisdiction adds another layer of compliance.

If your current process involves spreadsheets and guesswork, it may be time for a more scalable approach. Staying compliant in a fragmented tax landscape requires more than just rate tables.

How Economic Uncertainty Drives a Tax Rate Increase

Economic uncertainty doesn’t just slow growth, it changes how states think about taxation.

When forecasts look a little gloomy, states prioritize stability. That means leaning into revenue sources that are broad, recurring, and difficult to avoid. Sales tax checks all of those boxes.

At the same time, many states are pursuing income tax reductions, particularly for families, seniors, and lower-income earners. While politically popular, these cuts create a gap that needs to be filled.

Increasingly, that gap is being filled by:

• Greater reliance on consumption taxes
• Expanded enforcement of economic nexus
• More aggressive interpretation of what constitutes a taxable transaction

In other words, even if you don’t see a dramatic tax rate increase, your compliance burden is likely still going up.

Why Some States Keep Lower Sales Tax Rates

Not every state is rushing to raise rates. In fact, some continue to maintain some of the lowest state sales tax rates in the country. And there is a strategic angle, as a low headline rate is politically attractive.

But low doesn’t always mean simple—or even truly “low.”

Take Colorado, for example. It boasts one of the lowest statewide rates, yet its average local sales tax rates push the combined burden much higher. Similarly, so-called “zero sales tax” states like Oregon and New Hampshire make up the difference through higher income or property taxes.

There is another added, often overlooked element. States with lower rates often have the most room—and incentive—to expand their tax base. And increasingly, that expansion is targeting services and digital transactions.

The Digital Services Shift: The New Frontier in Sales Tax

This is where many states are moving quickly and decisively.

Historically, sales tax applied primarily to tangible personal property (physical goods you could see, touch, and ship). But today’s economy runs on subscriptions, software, and services.

We’re seeing a clear shift toward taxing:

• SaaS platforms
• Digital products and streaming services
• Marketing, IT, and professional services
• Bundled transactions that combine goods and services

States have noticed this consumer shift.

Maine offers one of the most direct examples. As of January 1, 2026, the state repealed its Service Provider Tax and folded those services into the general sales tax base. At the same time, it explicitly added digital audiovisual and audio services—like streaming platforms—to the taxable mix. This wasn’t just a tweak but an entire structural shift. Maine effectively eliminated the distinction between “goods” and many “services,” bringing both under the same umbrella.

Louisiana has taken a similarly assertive approach, expanding its tax base to include SaaS, digital and information services. Even further, many of these are subject to an additional 5% state tax.

Then there’s Maryland, which has taken a more targeted route. By taxing digital advertising revenues (primarily impacting large tech companies) and applying tax to certain IT and data services, the state is focusing directly on high-growth, high-revenue sectors.

Even beyond these examples, state policymakers are considering new corporate taxes aimed at dominant sectors such as digital services and AI-driven enterprises. This signals that the tax base conversation could move even further beyond traditional retail sales tax.

If you sell digital products, SaaS, or services, it’s worth taking a closer look at where you may already have exposure. Many businesses discover they’ve crossed into taxability long before they realize it.

How Businesses Can Anticipate Future Base Expansions

Keeping up with sales tax rates is no longer enough. The bigger risk lies in what becomes taxable next. The businesses that stay ahead of this curve tend to focus on patterns.

For example, when a state begins taxing digital goods, it often isn’t long before B2B and professional services follow. When local jurisdictions gain more authority, complexity tends to increase across the board.

From an operational standpoint, it’s critical to understand your own exposure:

• Are your offerings purely digital, or bundled with services?
• Do you provide customization, support, or consulting?
• Are different components of your product taxed differently across states?

These are the gray areas where liability tends to build quietly over time.

There’s also the question of scale. Economic nexus thresholds continue to evolve, and even minor changes can expand your filing footprint significantly.

At a certain point, manual tracking becomes unsustainable. Monitoring each tax rate increase and shifting taxability across jurisdictions requires a level of automation—and oversight—that most internal teams simply aren’t built for.

If sales tax is taking more time than it should—or creating uncertainty in your reporting—it may be time to explore a more proactive compliance strategy.