Managing sales & use tax has always been one of the most challenging aspects of running a business. With each state in the U.S. setting its own rules, rates, exemptions, and compliance requirements, the system is anything but uniform. As we move into 2025, companies are facing even more complex challenges—from new digital service tax laws to shifting nexus thresholds—making it more important than ever to stay informed and compliant.
This article explores what sales & use tax means today, common pitfalls businesses face, and why partnering with experts like TaxMatrix can help companies save money, minimize audit risk, and stay ahead of regulatory changes.
What Is Sales & Use Tax?
At its core, sales tax is imposed by states and local governments on the retail sale of goods and certain services. Businesses are required to collect this tax from customers at the point of sale and remit it to the state.
Use tax, on the other hand, applies when sales tax hasn’t been collected at the time of purchase—for example, when a company buys equipment from an out-of-state vendor who doesn’t charge sales tax. In this case, the responsibility falls on the purchaser to self-assess and pay the use tax.
Together, these two taxes form the framework that states rely on to generate revenue. For businesses, however, the complexity comes from the variations in rules, exemptions, and enforcement practices from one state to another.
The Growing Complexity of Sales & Use Tax
In the wake of the Wayfair Supreme Court decision, states now have greater authority to impose sales & use tax obligations on remote sellers. As a result, economic nexus rules have expanded, requiring businesses with no physical presence in a state to register and remit taxes if they exceed certain sales or transaction thresholds.
In 2025, several states are tightening these rules:
Utah eliminated its transaction threshold, relying only on revenue thresholds.

Maryland expanded its sales tax base to include digital products, cloud services, and IT services.

Mississippi reduced grocery rates but increased oversight on third-party booking platforms.

These changes illustrate that states are broadening their tax reach and targeting industries that were historically under the radar, such as SaaS, e-commerce, and digital media.
For businesses operating in multiple states, the challenge is ensuring compliance across each jurisdiction. Failing to do so can result in audits, back taxes, interest, and penalties.
Common Audit Triggers in Sales & Use Tax
State revenue departments use data analytics, third-party reporting, and audit sampling to identify potential non-compliance. Some of the most common sales & use tax audit triggers include:
High exempt sales without valid exemption certificates

Inconsistent or late filings of tax returns

Operating in new states without registering for sales tax after crossing nexus thresholds

Discrepancies between vendor/customer reporting and business filings

Incorrect product or service classification (e.g., mislabeling taxable software as exempt custom software)

Once an audit is triggered, states often review three to four years of records, meaning even small mistakes can accumulate into significant liabilities.
How Businesses Can Reduce Risk
To minimize exposure, companies should adopt a proactive approach to sales & use tax compliance. Key best practices include:
Track Nexus Obligations
Regularly review where you have economic or physical nexus. As your business grows or expands sales channels, you may inadvertently create new filing requirements.

Strengthen Exemption Certificate Management
Missing or invalid certificates are one of the biggest reasons companies fail audits. Implementing a systematic process to collect, verify, and store certificates is critical.

Automate Tax Calculations
With thousands of tax jurisdictions in the U.S., relying on manual calculations is risky. Automation tools can help ensure accuracy across multiple states and product categories.

Perform Internal Reviews
Conduct self-audits to identify gaps before states do. Reconciling reported sales tax with accounting data helps spot errors early.

Stay Informed on Law Changes
Rules evolve constantly, especially in industries like software, e-commerce, and manufacturing. Monitoring legislative updates is essential to avoid surprises.

Why Work with Experts Like TaxMatrix
Even with strong internal processes, the burden of navigating complex sales & use tax regulations can overwhelm finance and accounting teams. That’s where specialized partners like TaxMatrix come in.
TaxMatrix helps businesses:
Recover overpaid taxes through refund reviews and utility exemption studies

Defend against audits by reducing assessments and managing the process with state authorities

Ensure compliance by monitoring nexus obligations and regulatory changes

Provide training and support so internal teams can minimize future risks

What sets TaxMatrix apart is their success-based approach. In many cases, clients only pay if refunds or savings are secured, making their services low-risk but potentially high-reward.
Real-World Impact
Consider a manufacturing company that purchases large amounts of electricity for production. Without a proper exemption study, they may overpay sales tax on energy used in qualifying production processes. By engaging TaxMatrix, companies can identify and recover years of overpaid taxes—money that can be reinvested into operations.
Similarly, in the pharmaceutical and biotech industries, where equipment and R&D purchases are frequent, TaxMatrix has uncovered millions in recoverable taxes that would have otherwise gone unnoticed.
Final Thoughts
The landscape of sales & use tax is only getting more complicated in 2025. With expanding state rules, new taxable categories, and greater reliance on data-driven audits, businesses cannot afford to take a reactive approach.
By understanding key risks, tightening compliance practices, and working with experts like TaxMatrix, organizations can not only reduce audit exposure but also unlock hidden savings. In an environment where every dollar counts, proactive tax management is not just a compliance exercise—it’s a competitive advantage.
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