Key Highlights:
For the direct-to-consumer (DtC) alcohol shipping market, 2025 ended up being rather active in terms of new and amended laws. As the 2026 legislative calendar comes into focus, however, there remains much more for states to do, either to remove ongoing barriers or to establish new DtC shipping privileges where they are currently not available. As a result, DtC alcohol shipping laws are expected to remain a major focus for regulators, producers, and consumers alike.
Making laws is a complicated process, and so it is not uncommon for state legislatures to need to pass follow-up bills to correct issues (both foreseeable and surprising) that resulted from past law changes. This dynamic has become especially apparent as states continue to refine and revisit DtC alcohol shipping laws enacted in recent sessions.
In 2025, both Mississippi and Delaware passed new DtC wine shipping laws, creating entirely new markets to service their wine-loving residents (Mississippi opened last July; Delaware is set to make its law effective some time in 2026). However, both bills included provisions that restrain the ability of wineries to fully engage in their state markets and that ultimately work to limit consumer choice.
The central issue with both states’ new DtC wine shipping laws is that they restrict wineries from both DtC shipping their products and selling them at wholesale in the state.
In Mississippi, this comes down to prohibiting a DtC shipper from shipping wines that have been listed for sale through the Mississippi Alcohol Beverage Control Board. While this is far from a complete ban, it does present a challenge for wineries to track which of their wines are sold in which channel—and, of course, it severely limits the ability of a winery with an active DtC shipping program from expanding their wholesale presence in the state.
Delaware presents a far greater problem. At present its law bans any winery that has, or is part of a larger organization that has, a relationship with a Delaware distributor from even applying for a DtC license. Indeed, there are many problems with the bill that passed in Delaware last year, including its exorbitant license fee and very limited shipping volume caps, so it is no wonder that a fix bill is a key priority for advocates of DtC wine shipping.
While there was significant effort in 2025 to finally filling the DtC wine shipping map, there are still several states with long-lasting restrictive laws that come up regularly as a target for change.
New Jersey is the last state to maintain a production cap on DtC wine shippers, banning wineries that produce more than 250,000 gallons a year. While, as the latest Sovos ShipCompliant/WineBusiness Analytics Direct-to-Consumer Wine Shipping Report shows, it is small, very small and limited production wineries that make up the majority of DtC wine shippers, the industry has unified against production caps, finding them both a threat to potential growth by a winery and a provision that only creates unnecessary division within businesses that otherwise should work together to improve their collective positions. As such, you should expect New Jersey to be a focus of legislative change, to remove this last barrier.
Similarly, with Arkansas adopting a proper DtC shipping law last year, Rhode Island is now the last state to require that DtC wine shipments happen only after the consumer has made an onsite purchase from the winery, effectively blocking online, phone, and club sales. The other 48 states, plus D.C., that do allow wineries to make and fulfill remote sales to their residents show how needless and problematic Rhode Island’s ongoing restriction is.
And indeed, 2026 could be the year to remove a lot of “final restrictions,” as Utah is now the only state with no allowance for any kind of DtC wine shipping (though, of course, even with its new law, Delaware retains its “do not ship” warning from Wine Institute). Utah legislators are not unaware of the broad public interest behind DtC wine shipping, as they have made motions in recent years to open their state by creating (ultimately extremely restrictive) special order options. While it is very unlikely that Utah will pass a proper DtC shipping law in 2026, we cannot entirely say it would be impossible—and nothing will change there if we don’t first think it could, so here’s hoping.
While wine shipping naturally gets lots of attention, both the spirits and beer industries are increasing their efforts to enable their own DtC shipping privileges.
Indeed, there was a huge update in 2026 when California finally passed a proper spirits shipping law that created a new license available to distilleries in all states. Of course, there are still a few noticeable issues with the California bill that require a subsequent fix. For one, the law is set to expire on December 31, 2026, which means that California consumers currently have less than a year to enjoy this market. The law also includes a bizarre daily shipping limit (which allows a distillery to ship a large total amount per year, as long as they make constant shipments) and a production cap (which have so far been unfortunately common with DtC spirits shipping laws). So, while it is fully expected that the law will be extended (if not made permanent), it would be a truly positive sign for the state to correct everything.
Nevertheless, the passage of the California DtC spirits law was tremendous news and something that every other state should pay attention to. Indeed, DtC spirits shipping remains extremely popular among both consumers and the general public and so it is heartening to hear that several states—Iowa, Colorado, Missouri—are likely to introduce legislation to make that available to their residents.
And, of course, there remains ample availability to expand DtC beer shipping in 2026 as well.
Despite recent market challenges, DtC shipping remains popular and something that consumers will continue to seek out when looking for their favorite wines, ciders, spirits, and beer. And so state legislators should do what they can to enable consumer choice by removing these unnecessary barriers.
Wine can be shipped DtC in 49 states and D.C., while beer shipping is permitted in 11 states plus D.C., and spirits can be shipped to 10 states plus D.C.
Common requirements and restrictions include licensing, volume limits, distributor relationship prohibitions, and brand registration.
Producers should monitor legislative sessions for fix bills, expansion efforts beyond wine, and states revisiting outdated restrictions. As consumer demand remains strong, momentum is likely to continue building around modernizing DtC alcohol shipping laws.
Arkansas, Mississippi, and Delaware passed new laws, while Maine added container redemption requirements, and California updated distilled spirits shipping rules.
Should states eliminate their corporate and personal income taxes and replace them with a broad-based sales tax applied at a modest rate? The White House Council of Economic Advisers says absolutely yes. In a recently published paper, the Council makes the case that sales tax is a far more stable source of revenue and that states embarking on this transformation would grow their GDP, encourage innovation and entrepreneurship, increase wages, and attract high income individuals. However, not everyone agrees and critiques of these conclusions have been swift and scathing.
This report arrives amid growing momentum for state-level tax reform. While Kentucky and Louisiana have already enacted changes consistent with these suggestions, similar proposals are advancing in Missouri, Georgia, and Alaska during this legislative session, suggesting increased interest in greater reliance on sales taxes.
In this article we will talk about the assertions made by the Council, the critiques thereto, and how these changes are (and are not) playing out in real time.
Legislators and policymakers have a variety of potential taxation methodologies to choose from, including income tax (personal and corporate), property tax, sales tax, excise tax, and other fees and levies. Today, states vary widely on their taxation approach, with 9 states levying no personal income tax at all and 5 states with no state-level sales tax. Within the remaining states that have both sales and income tax, the proportion of state revenue derived from each varies significantly.
The paper asserts that not all choices are equal, that some taxes are more inefficient at generating revenue and impose greater costs on society. Their assertion is that sales taxes are far more efficient and less burdensome than income taxes, and that states would do well to eliminate income taxes entirely.
The authors consider the following to be the most appalling “economic costs” of income tax.
The aggregate effect, the authors suggest, is income tax increases work to contract the economy. They suggest that a tax increase of 1% of GDP will shrink real GDP by 2% to 3%. Conversely, a one percentage point cut in income tax can ultimately raise real GDP by 1.8%.
The paper further notes that beyond inefficiency, income tax revenue fluctuates sharply with economic conditions. States that are heavily reliant on income taxes can experience a revenue decline of 20% to 30% during hard economic times while states more reliant on sales and property tax may experience a decline of 5% to 15% under similar circumstances. Since most US states are legally required to pass a balanced budget, these fluctuations present a material challenge to long-term fiscal planning.
Based on this data, the authors propose eliminating income taxes and adopting a broad-based sales tax covering all products and services except housing, groceries, business inputs, or any item taxed under another system (e.g. gasoline tax, alcohol tax, excise tax). Most importantly, the Council contends that if states only increase spending to account for inflation, the corresponding average sales tax rate across the country needs to be no higher than 6.2%.
However, these optimistic projections have drawn immediate pushback from tax policy experts.
The Tax Foundation, which was frequently cited in the report, has already posted an article suggesting that the conclusions reached by the Council do not withstand scrutiny. While conceding that consumption taxes are indeed more efficient than income taxes, they believe the average rate needed to replace all income tax revenue is closer to 17.51% rather than 6.2%. Their main point of contention is that the Council envisions a sales tax base that includes elements of the economy that are either impossible or impractical to tax, including:
For a household spending $50,000 a year on taxable goods and services, the difference between a 6.2% sales tax rate ($3,100 annually) and a 17.51% rate ($8,755 annually) represents an added tax burden of $5,655. Whether that would be fully offset by dropping their state income tax obligation is far from clear.
The report also assumes perfect compliance – meaning every taxpayer pays 100% of their obligation. Unfortunately, every tax professional knows there will always be a “gap” between taxes due and paid. For example, the IRS estimated that the net tax gap for Tax Year 2022 was $606B, over 13% of total true tax liability.
In an article published by Accounting Today, the author draws attention to the fact that the Council completely disregards the regressive nature of sales taxes. Sales taxes are regressive because they impose a higher financial burden on people who spend a greater percentage of their income and a lesser burden on those that save. Broadening the sales tax base would exacerbate this regressive effect. They also note that there was no mention of tariffs, which already represent an added regressive burden on consumers.
And the report is only a few weeks old, additional critique is sure to follow in the coming weeks and months.
The pandemic taught states a valuable lesson about sales tax stability. As businesses shuttered, states predicted massive revenue shortfalls. What they didn’t count on was an increase in consumer spending on material goods, all rendered fully taxable by the 2018 Supreme Court decision in South Dakota v. Wayfair. Sales tax, at least in part, saved the day.
Since then, several states have adopted legislation that reduces their income taxes while simultaneously expanding their sales tax, the most notable examples being Kentucky and Louisiana.
In 2022, KY HB-8 was passed over Democratic Governor Andy Beshear’s veto by the Republican supermajority. Under the law, the personal income tax rate was cut from 5% to 4.5% (currently 3.5% with the possibility of dropping further assuming certain financial triggers are met) while expanding the sales tax base to include close to 40 new service categories.
More recently, in 2024-2025 Louisiana passed a series of bills reducing the personal income tax rate to a flat 3%, reducing the corporate income tax rate to a flat 5.5%, and repealing the corporate franchise tax entirely. These changes were funded, at least in part, by increasing the standard sales tax rate to 5% and expanding the sales tax base to include a number of additional goods and services.
Although the 2026 legislative session is just underway, there is a clear push for significant tax reform in several Republican-led states. Missouri Governor Mike Kehoe announced, in his state of the state address, a proposal to fully eliminate the individual income tax over time. While he hasn’t specified which new services would become subject to sales tax, expanding the base is clearly on his mind as he has said he would never tax agriculture, healthcare or real estate. Likewise, Georgia has convened a Senate Special Committee on eliminating the income tax. The proposal remains vague about the impact on sales tax. Finally, Alaska Governor Mike Dunleavy is proposing a fiscal plan that includes eliminating the corporate income tax and adopting a brand new, seasonal, statewide sales tax.
Eliminating state income taxes reflects a significant gamble on consumption-based taxation. Proponents argue sales taxes are more stable and pro-growth; critics warn of inadequate revenue and regressive impacts. States pursuing this path face a strategic constraint. Once nearly everything is taxed, further expanding the base becomes impossible, leaving politically unpopular rate increases as the only tool during budget shortfalls.
As Kentucky, Louisiana, and others forge ahead, their experiences will provide crucial evidence about whether income tax elimination delivers promised benefits or creates new fiscal challenges. For now, the transformation of state taxation remains a live experiment.
Key highlights:
In a year marked by the U.S. wine market downturn, Napa demonstrated rare resilience in the direct‑to‑consumer (DtC) wine channel, outperforming every other major region. Napa was the only region in the report that saw any positive momentum. The overall DtC wine channel saw a 6% decline in value and a 15% drop in volume, with an average bottle price of $56.78, compared to Napa’s 1% value growth, 8% volume decline, and $99.97 ABP.
Napa DtC wine shipping stood out as a stabilizing force, held up by high‑end wine consumers who continued to buy even as other regions faltered.
Data from the 2026 Direct‑to‑Consumer Wine Shipping Report, written in partnership with WineBusiness Analytics, reveals a clear narrative: Napa’s customers were far more resilient than the broader DtC market, cushioning the region from much of the downturn and allowing it to outperform in several critical metrics.
One of the strongest indicators of Napa’s staying power is its rising ABP. In 2025, Napa DtC shipments averaged $99.97 per bottle, a 9% year‑over‑year increase, and more than double the average across the six other tracked regions, which collectively sat at $39.80.
Even as many consumers pulled back, Napa’s core audience continued to engage, reinforcing Napa’s reputation as the epicenter of premium American wine.
While the overall DtC wine channel saw a 6% decline in value and a 15% drop in volume, Napa once again defied the trend. The region grew total shipment value by 1% and posted a comparatively modest 8% volume decline. Napa clearly benefited from the willingness of customers at the high end of the market to continue buying compared to those at the lower end.
While Cabernet Sauvignon remains Napa’s signature varietal, Chardonnay was the standout performer of 2025. According to the report, Napa Chardonnay experienced:
Not only does this highlight growing consumer willingness to invest in premium white wines, but it also signals a refreshed opportunity for Napa producers.
Chardonnay’s performance suggests a shifting DtC landscape. With strong interest in premium white wines, wineries can capitalize through:
These strategies allow producers to meet rising demand while diversifying beyond the region’s red‑wine‑heavy identity.
Despite the notable rise in premium whites, Napa’s ultra‑premium reds remain the backbone of DtC value. In 2025, ABP reached:
Together with Chardonnay, Sauvignon Blanc, and Pinot Noir, these wines accounted for 73% of total Napa DtC value, a testament to the strength of Napa’s top‑tier offerings.
The U.S. wine industry continues to feel pressure from shifting demographics, health‑conscious behaviors, the rise of GLP‑1 drugs, and competition from RTDs and cannabis beverages. Yet Napa consumers remain comparatively insulated. They are:
Together, these traits highlight why Napa continues to chart a slightly steadier path than the broader DtC market.
To navigate continued volatility and maximize Napa’s unique advantages, wineries should prioritize:
Early indicators point to a challenging first half of 2026 with possible stabilization later in the year or beyond. Napa’s strong premium consumer base positions the region well, but innovation, experience‑driven programming, and consistent tasting room visitation will be essential to sustaining Napa County wine shipping performance.
Napa’s 2025 performance reinforces an important truth: premium buyers continue to anchor DtC wine shipping. Napa’s ability to hold value—even in a contracting market—speaks to the strength of its brands, the loyalty of its customers, and the power of premium positioning.
For wineries, the path forward is clear. Lean into the experiences, quality, and connection points that high‑end buyers value most. Napa’s DtC customers remain the most resilient segment in today’s market and represent the strongest path to future growth.
Napa’s average bottle price reached $99.97, a 9% increase over 2024 and more than double other tracked regions.
Top performers included Chardonnay, Cabernet Sauvignon, and Red Blend.
Premium buyer retention, tasting‑room optimization, Chardonnay‑driven opportunities, and preparing for a volatile first half of the year or more.
Illinois imposes a statewide sales and use tax rate of 6.25%. The state does allow local jurisdictions to levy additional sales taxes; cities, counties, and special districts in Illinois can impose their own sales tax in addition to the state tax rate. The following are examples of special local taxes in Illinois, in addition to standard state and local taxes:
Illinois sales and use tax applies to the sale and lease of tangible personal property and certain enumerated services. Sellers selling taxable goods and/or services are required to collect and remit sales tax to the state.
Examples of taxable items and services include:
A seller is liable to collect and remit Illinois sales tax if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Illinois
Illinois enforces economic nexus for remote sellers. If your business has:
you may be required to register for and collect Illinois sales tax.
Learn more on the Out-of-State Retailer Maintaining a Place of Business in Illinois Registration Flowchart.
Illinois Sales Tax Exemptions
Certain sales in Illinois are considered generally exempt from the sales and use tax requirements.
Additionally, Illinois exempts sales to certain entities from the sales/use tax, including the following:
To claim an exemption, an entity must provide an exemption certificate with the sale. The Treasury accepts: STAX-1 Registration as the most commonly used form
Additional guidance on acceptable exemption formats can be found in Tax exempt organizations.
Illinois offers multiple methods for filing and remitting sales and use tax:
Electronic payments are required if your annual tax liability meets or exceeds $20,000 for Retailer’s Occupation and Use Tax
No, Illinois does not currently offer sales tax holidays.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, Illinois imposes the following point of sale fees:
E-911 Fee
Tire User Fee
Generally, Illinois does not apply sales tax to shipping charges when the charges are separately stated on the contract or invoice.
For sellers maintaining physical nexus with Illinois, Illinois generally requires origin sourcing for intrastate transactions and destination sourcing for interstate transactions.
For sellers with only economic nexus with Illinois, destination sourcing applies.
Illinois businesses or individuals selling tangible personal property or certain services to Illinois consumers may need to register to collect sales tax when meeting qualifying requirements. More information may be found at: Business Registration
For more information on U.S. sales tax compliance across all 50 states, check out our:
Looking for an easier way to manage sales tax in [State] and beyond? Learn how Sovos simplifies compliance.
The Treasury and IRS have begun implementing a new car loan interest deduction that allows many individual taxpayers to deduct interest paid on qualifying vehicle loans. While the policy has drawn headlines, the real work sits with auto finance lenders and financial services companies that must operationalize the rules, support borrowers, and meet new information reporting requirements.
This is not a “wait and see” moment. But it is also not a moment to start building bespoke systems for a regulation that is temporary and still evolving.
The deduction was created by the One Big Beautiful Bill Act of 2025, which added IRC section 163(h)(4). That new section carved out a limited exception to the long-standing rule that personal auto loan interest is not deductible.
To implement the statute, the IRS and Treasury issued:
Industry comments on the proposed regulations are due February 2, 2026. That matters because until the comment period closes and Treasury reviews feedback, the regulations cannot be finalized. As a result, the Form 1098-VLI cannot be finalized either.
Even in a smooth process with no major changes, a spring 2026 final form release is the earliest realistic outcome. That leaves lenders in a long interim period where data must be captured, but reporting rules are not final.
This timing reality makes one thing clear: building to a draft form is a mistake.
Under the proposed regulations:
The regulations state that qualified passenger vehicle loan interest includes all interest payable with respect to the amount financed under a specified passenger vehicle loan. That language indicates that when a prior vehicle loan balance is rolled into a new qualifying loan and included in the amount financed, the amount of interest attributable to that rolled-over amount is included.
While future guidance may refine boundaries, lenders should assume this interest is in scope and ensure it is captured at the data level.
With the comment period still open on these Proposed Regulations and the final version of Form 1098-VLI months away from finalization, now is the worst possible time to hard-code reporting logic.
What lenders should be doing instead is ensuring they can reliably capture:
A more practical approach is to avoid locking reporting logic to a draft form altogether. With the regulations still open for comment and the form unlikely to be finalized until at least spring 2026, hard-coding 1098-VLI reporting workflows now creates unnecessary rework risk.
Instead, lenders should focus on ensuring that core systems can consistently capture and retain the underlying data elements required for reporting, while relying on an external reporting layer that can adapt as requirements evolve. Separating data capture from reporting execution reduces the likelihood that changes in form layout, instructions, or definitions force downstream system redesigns.
The form will evolve. The obligation to produce accurate, defensible data will not.
Auto finance lenders are already subject to information reporting and withholding (IRW) rules. Many issue other information returns, such as Form 1099-INT or Form 1099-NEC, and any lender that files information returns is exposed to penalties under IRC sections 6721 and 6722 for incorrect or late reporting. The car loan interest deduction adds another reporting obligation to that existing footprint.
This is the moment to consolidate information reporting and withholding into a single outsourced solution, so that turning requirements on and off is configuration, not engineering. Without that separation, internal IT resources are inevitably pulled into designing and supporting a reporting build that will be retired when the deduction sunsets.
That risk is compounded by the fact that Form 1098-VLI must be transmitted through the IRS’s new IRIS platform via API, meaning this is not just a one-off form build but part of a broader technical shift in how information returns are filed. Even lenders that already issue other 1099s must now account for IRIS connectivity, authentication, schema management, and ongoing change, making a narrow, form-specific build particularly inefficient in the context of the wider IRIS transition.
Lenders should also expect state reporting considerations to follow federal implementation. Several states already require or accept Forms 1098 for mortgage interest and Forms 1098-E for student loan interest.
While no states have yet issued guidance specific to Form 1098-VLI, state conformity historically lags federal action. When it does arrive, it often expands reporting scope rather than narrows it. Planning solely for federal reporting increases the risk of having to revisit design decisions once state requirements emerge.
Name and TIN Accuracy Cannot Wait
Although incorrect name and TIN combinations remain the most common trigger for IRS information return penalties under IRC sections 6721 and 6722, IRS TIN Matching is not available for Form 1098-VLI, since the IRS only permits TIN Matching for payments subject to backup withholding.
That does not reduce the risk, but it does shift where the control must live.
For vehicle loan interest reporting, best practice is to collect a valid Form W-9 at onboarding and to ensure that the name and TIN used for tax reporting align precisely with the customer identity information already collected for AML and KYC purposes. This is not only a tax law requirement for W-9 information to be treated as valid, but also an operational consistency issue.
Lenders should have an operational process in place to:
Getting tax identity right at the front end reduces penalty exposure, limits post-filing remediation, and avoids unnecessary borrower outreach after forms are issued.
Borrowers have never received a Form 1098-VLI before. Many will not recognize it, and lenders should expect questions unless expectations are set in advance. At the same time, lenders are not in the business of providing tax advice and should not be placed in that position.
The goal is not to explain how the deduction works. It is to reduce confusion and avoid unnecessary call volume.
Practical steps lenders should consider in 2026 include:
Clear, proactive communication can prevent confusion without crossing into tax advice and can materially reduce downstream customer service impact during the first filing season.
Open Questions Reinforce the Case for Outsourcing
Some technical questions remain unresolved, and they are not academic. They go directly to how interest must be calculated, categorized, and reported on the new Form 1098-VLI.
Other IRS interest reporting regimes make clear that “interest” is not always limited to stated periodic interest. For example, in the student loan context, Treasury regulations under section 1.221-1(f) treat certain capitalized interest and related charges as interest for reporting purposes. Similarly, mortgage interest reporting under section 1.6050H-1 can include amounts beyond simple stated interest, depending on how charges are structured and assessed, including certain late charges and loan-related fees.
The proposed vehicle loan interest rules are still unclear, especially regarding late fees, deferred interest, and origination charges as reportable interest for Form 1098-VLI. Until Treasury issues final regulations, lenders should expect possible changes and avoid relying on interpretations that may not be permanent.
Lender Action Plan: Car Loan Interest Deduction Reporting
Again, The rules are not final. The form is not final. But the reporting obligation is clearly coming. Lenders need to act without hard-coding assumptions that may change.
That means focusing on durable data, clean tax identity, and a reporting approach that can adapt as guidance evolves and eventually sunsets. How this is handled now will determine whether 1098-VLI becomes a manageable compliance exercise or another cycle of unnecessary rework.
Learn more about the OBBA and its impact.
Why Financial Institutions Overpay Sales & Use Tax and How to Stop It
$750,000. That’s how much one mid-size U.S. bank recovered in a single quarter—money they’d been overpaying in use tax for years without realizing it.
This wasn’t a struggling institution with a skeleton crew managing compliance. They had competent tax professionals. Established processes. They believed they were compliant. They were compliant. They were just wrong.
And if you’re leading finance, tax, or operations at a bank, credit union, lender, or fintech, there’s a good chance the same thing is happening to you right now.
Financial services institutions are built on precision. Every basis point matters. Every dollar is tracked, audited, and reconciled. Risk management isn’t a function; it’s the foundation of everything you do.
And yet, when it comes to sales and use tax compliance, many of the most sophisticated financial institutions in America are operating blind.
Consider the math: the average mid-size financial institution processes over 10,000 procurement transactions per month. If just 3% involve incorrect tax treatment, that represents 300+ potential audit triggers every single month. Over a year, that’s 3,600 opportunities for errors to compound, errors that auditors are trained to find.
The annual U.S. tax compliance burden exceeds $546 billion. With 12,000+ tax jurisdictions and 25 states now taxing SaaS products, the complexity is exploding.
Your organization isn’t just “a company with lots of transactions.” The nature of how financial services institutions operate creates a distinct tax compliance profile that standard solutions often fail to address.
Massive procurement ecosystems: Banks, lenders, and fintechs purchase from thousands of vendors across every category — technology services, data subscriptions, professional consulting, equipment, facilities management. Each category has different taxability rules that vary by state.
Decentralized purchasing: Unlike manufacturing where procurement flows through central purchasing, financial services organizations have purchases initiated from branches, trading floors, operations centers, and remote teams. Consistent tax treatment across all entry points is nearly impossible without automation.
Multi-entity structures: Holding companies, bank subsidiaries, broker-dealer entities, insurance affiliates – financial services groups often operate through complex legal entity structures spanning multiple states. Each entity may have different nexus obligations and exemption statuses.
Technology intensity: No industry has embraced SaaS and cloud services more aggressively than financial services. From core banking systems to trading platforms to customer-facing apps, your technology stack is vast and increasingly subject to sales tax in ways it wasn’t five years ago.
Both buyer AND seller: Here’s what truly sets financial services apart: you’re not just a buyer managing use tax exposure. You’re increasingly a seller of taxable digital services. Credit monitoring tools, financial planning dashboards, loan origination platforms – these SaaS products may trigger sales tax collection obligations you’ve never considered.
If there’s a single emerging risk keeping financial services tax directors up at night, it’s this: SaaS taxation is exploding in complexity, and most organizations are behind.
Twenty-five states now tax SaaS in some form. Seven additional states tax SaaS with download components. Just in 2024, California expanded sales tax to cover certain digital services including data extraction and analytics that are core to modern financial operations. Vermont began taxing prewritten software delivered remotely.
The same credit monitoring SaaS product might be fully taxable in Texas, partially taxable in Connecticut (6.35% for personal use, 1% for business), completely exempt in Florida, and subject to entirely different rules in Washington. Your vendor doesn’t know your business-use status and probably isn’t getting it right.
Now flip the script. If you offer any digital product to customers (and in 2025, almost every financial institution does) you may be triggering sales tax collection obligations without knowing it. Credit monitoring subscriptions, personal finance apps, loan prequalification tools, client portfolio dashboards, fraud alert services, white-labeled fintech platforms: all potentially taxable.
Under economic nexus rules established after South Dakota v. Wayfair, you can trigger collection obligations in states where you have no physical presence just by selling to enough customers there. For a bank with customers in all 50 states, or a fintech serving a nationwide user base, crossing these thresholds is nearly inevitable.
If SaaS taxation is the emerging threat, use tax is the chronic condition that never quite gets treated.
The concept is deceptively simple: when you buy something and the vendor doesn’t charge you sales tax, you owe “use tax” to your state at the same rate. It’s a self-assessed obligation in every state with a sales tax. In practice, it’s anything but simple.
Consider what happens with every purchase: Vendor invoices you. Invoice may or may not include sales tax. If tax is charged, was it the right amount? If not charged, do you owe use tax? At what rate and to which jurisdiction? How do you accrue and remit correctly? At each step, there’s room for error. Multiply this across thousands of transactions per month, and errors become statistically inevitable.
Vendor trust: You assume if the vendor charged tax, they got it right. They often don’t. Vendors may not know your exemption status, your ship-to location rules, or the current rate in your jurisdiction.
Exemption confusion: Financial services organizations often qualify for exemptions on certain purchases, but claiming exemptions requires documentation that vendors accept. Without centralized certificate management, exemptions go unclaimed or get challenged in audits.
Blanket accruals: Some organizations simply accrue use tax on everything where no tax was charged, a “better safe than sorry” approach. This leads to massive overpayment on exempt purchases and services.
Inconsistent application: Without automated rules, similar transactions get treated differently depending on who processes them, what time of month it is, and how busy the team is. Inconsistency is an auditor’s dream.
State auditors targeting use tax compliance in financial services typically focus on out-of-state vendor purchases, technology and SaaS purchases with unclear taxability, professional services, fixed asset purchases, intercompany transactions, and purchases from non-traditional vendors like Amazon Business.
Beyond the actual tax owed, assessments typically include interest (8-12% annually from original due date), late payment penalties (5-25% of tax owed), negligence penalties for systematic failures, and fraud penalties up to 50%+ in cases of willful noncompliance.
An audit covering four years that finds $200,000 in underpaid tax can easily result in $350,000+ in total assessment after interest and penalties. And that’s for one state. Multi-state audits multiply quickly.
Financial institutions using automated use tax validation typically see a 65% reduction in monthly tax processing time, $500K to $1M+ in recovered over-accruals annually, 98%+ filing accuracy across all entities, and zero audit penalties post-implementation.
Here’s what that looks like for a mid-size bank: Starting with manual processes and three FTEs on tax compliance with periodic audit assessments, automation delivers approximately 800 hours per year saved (roughly $80,000 in labor value), first-year over-accrual recovery of $750,000, estimated avoided penalties of $50,000 per year, and filing efficiency gains of $30,000 per year in reduced external prep costs.
First-year ROI: greater than 400% return on technology investment.
Tax compliance, done right, isn’t just a cost to minimize. It’s a competitive advantage to leverage.
When your competitors are still processing tax manually, eating audit assessments, and missing recovery opportunities while you’ve automated the process, eliminated exposure, and redirected your tax team toward strategic work, that’s a meaningful edge.
The question isn’t whether your organization has hidden tax exposure. The question is how much and whether you’ll find it before an auditor does.
Assess your current exposure. Quantify what manual processes, audit risk, and missed recoveries are actually costing you. Build the business case, frame automation as an investment with measurable ROI, not just a compliance expense.
And engage a partner built for financial services, not generic tax tools adapted for your industry.
Learn more about purpose-built sales and use tax solutions for financial services.
Arkansas imposes a statewide sales and use tax rate of 6.5%, as established under the Arkansas tax code. While Arkansas does not allow local jurisdictions to levy their own independent sales tax structures, cities and counties may impose additional local sales taxes that apply on top of the Arkansas state tax rate.
As a result, the total Arkansas state tax burden can vary depending on where a transaction occurs. Businesses selling taxable goods or services in Arkansas, whether in-state or remotely, must understand and comply with AR sales tax law, including registration, collection, filing and remittance requirements.
Under Arkansas sales tax law, sales and use tax generally applies to tangible personal property and certain enumerated services. Sellers offering taxable products or services are required to collect and remit Arkansas sales tax or Arkansas use tax, depending on the nature of the transaction.
Common taxable items and services in Arkansas include:
A seller is liable to collect and remit Arkansas sales tax if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Arkansas.
Arkansas enforces economic nexus for remote sellers and marketplace facilitators. A business may be required to register and collect Arkansas sales tax if, during the previous calendar year, it had:
More details are available on the Arkansas Department of Finance & Administration Retail Sellers Page.
Arkansas also exempts sales to certain entities from the sales/use tax, including the following:
To claim an exemption, an entity must provide an exemption certificate with the sale. The Treasury accepts SST Certificate of Exemption – FOOO3 or Exemption Certificate FORM ST-391 as the most commonly used forms.
Additional guidance on acceptable exemption formats can be found in Sales and Use tax Forms (General section).
Arkansas does offer multiple methods for filing and remitting sales and use tax:
Businesses with average net sales of $200,000 or more per month must make required sales tax prepayments. Act 1142 also requires certain out-of-state sellers with high taxable sales volume to submit prepayments equal to 80% of their monthly state liability. Under Ark. Code Ann. §26-52-512, these prepayments must be made via electronic funds transfer (EFT).
Yes, Arkansas is part of the Streamlined Sales Tax (SST) initiative, a multi-state agreement designed to simplify and standardize sales tax rules. More information concerning SST may be found here.
Yes. Arkansas offers an annual back-to-school sales tax holiday, during which qualifying school supplies, clothing, and accessories may be purchased tax-free.
Yes, Arkansas imposes certain point-of-sale fees on specific products, including E911 and tire removal fees, which are collected from the final consumer at retail.
In most cases, Arkansas considers shipping, freight, and transportation charges to be part of the taxable sales price when the underlying product is taxable.
The current sales tax rate in Arkansas is 6.5%.
Arkansas is destination based for sales tax sourcing.
Yes. Arkansas accepts SER filings from any seller or tax provider capable of transmitting the return properly. Sellers do not need to participate in the SST Model 1 program to use SER—providers like Sovos can file on a seller’s behalf.
Arkansas businesses or individuals selling tangible personal property or certain services to Arkansas consumers may need register to collect sales tax when meeting qualifying requirements. More information may be found here: Register for a Tax Account
For more information on U.S. sales tax compliance across all 50 states, check out our:
Looking for an easier way to manage Arkansas sales tax, use tax, and compliance nationwide? Learn how Sovos simplifies sales tax compliance across all 50 states.
Kansas imposes a statewide sales and use tax rate of 6.5%. The state does allow local jurisdictions to levy additional sales taxes, which means businesses should verify local rates when calculating sales tax in Kansas.
Kansas sales tax rules apply to the sale of tangible personal property and certain enumerated services. Sellers selling taxable goods and/or services are required to collect and remit Kansas state sales tax to the state.
Examples of taxable items include:
A seller is liable to collect and remit Kansas state sales tax if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence, as outlined in Kansas Nexus laws. These rules are part of broader Kansas tax codes that govern compliance.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Kansas.
Kansas enforces economic nexus for remote sellers. If your business has:
you may be required to register for and collect Kansas sales tax.
Learn more on the Kansas’ Department of Revenue Remote Sellers page.
Certain sales in Kansas are considered generally exempt from the sales and use tax requirements.
Additionally, Kansas exempts sales to certain entities from the sales/use tax, including the following:
To claim a Kansas sales tax exemption, an entity must provide an exemption certificate with the sale. The Department of Revenue accepts the ST-28A as the most commonly used form.
Additional guidance on acceptable exemption formats can be found in the Exemption Certificates Pub. KS-1520
Businesses must follow Kansas tax filing procedures to remain compliant. Kansas offers multiple methods for filing and remitting sales and use tax:
Yes, Kansas s part of the Streamlined Sales Tax (SST) initiative, a multi-state agreement designed to simplify and standardize sales tax rules.
No, Kansas does not currently offer sales tax holidays.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, Kansas imposes the following point of sale fees:
As of July 1, 2023, Kansas does NOT charge sales tax on shipping/delivery charges if they are separately stated on the invoice.
Kansas is destination-based state for sales tax purposes
As of January 1, 2025, Kansas NO LONGER charges state sales tax on groceries (food and food ingredients). However, local sales taxes (city and county) may still apply
The contractor pays sales tax when purchasing materials, not when billing the customer.
Residential utilities like electricity, natural gas, propane, and water are exempt from Kansas state sales tax but may still be subject to local sales taxes, while the same utilities used for commercial or business purposes are fully taxable at both state and local levels.
Yes. Kansas accepts Simplified Electronic Returns (SER) from any seller or tax provider that can transmit the return properly. You don’t need to be in the SST Model 1 program to use the SER—providers like Sovos can file on behalf of any client who opts into that method.
Kansas businesses or individuals selling tangible personal property or certain services to Kansas consumers may need register to collect sales tax when meeting qualifying requirements. More information may be found at Kansas DOR Customer Service Center.
For more information on U.S. sales tax compliance across all 50 states, check out our:
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Hawaii imposes a statewide General Excise Tax (GET) rate of 4%. The state does impose local taxes at the County level. Counties are authorized to adopt a surcharge on the 4% GE tax rate. Businesses may pass on the GE tax and any applicable county surcharge to customers at the maximum pass-on rate. All counties in the state of Hawaii have adopted said surcharge with a current rate of 0.50%.
Hawaii sales and use tax applies to the sale of tangible personal property and certain enumerated services. Sellers selling taxable goods and/or services are required to collect and remit sales tax to the state. Understanding the nuances of sales tax collection in Hawaii is essential for businesses to stay compliant.
Examples of taxable items [and services] include:
A seller is liable to collect and remit Hawaii sales tax if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Hawaii.
Hawaii enforces economic nexus for remote sellers. If your business has:
you may be required to register for and collect Hawaii sales tax.
Hawaii Sales Tax Exemptions
Certain sales in Hawaii are considered generally exempt from the sales and use tax requirements.
Examples of exempt products and services in Hawaii include:
Additionally, Hawaii exempts sales to certain entities from the sales/use tax, including the following:
GET exemption certificates enable a purchaser to make tax-free purchases that would normally be subject to sales tax. The purchaser fills out the certificate and gives it to the seller. The seller keeps the certificate and may then sell property or services to the purchaser without charging sales tax.
Additional guidance and applicable forms can be found online here.
Hawaii offers multiple methods for filing and remitting GET:
No, Hawaii is NOT part of the Streamlined Sales Tax (SST) initiative
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, Hawaii imposes the following point of sale fees:
Businesses or individuals selling tangible personal property or certain services to Hawaii consumers need to register for a General Excise Tax (GET) license. More information may be found at the Hawaii Tax Portal under the Register New Business License link.
For more information on U.S. sales tax compliance across all 50 states, check out our:
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Arizona imposes a transaction privilege tax (TPT) on businesses in the state and is akin to sales tax administration. As such, it will often be referred to as “sales tax”. Arizona imposes a statewide TPT rate of 5.6%. The state does allow local jurisdictions to levy additional taxes.
Arizona TPT applies to the sale of tangible personal property and certain enumerated services. Sellers providing taxable goods and/or services are required to collect and remit TPT to the state.
Examples of taxable items and services include:
A seller is liable to collect and remit Arizona TPT if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Arizona.
Arizona enforces economic nexus for remote sellers. If your business has:
you may be required to register for and collect Arizona TPT.
Learn more on the Arizona Department of Revenue Economic threshold page.
Certain sales in Arizona are considered generally exempt from TPT requirements.
Additionally, Arizona sales tax exemptions apply to certain entities from TPT with proper documentation, including:
To claim an exemption, an entity must provide an exemption certificate with the sale. The Treasury accepts TPT Form 5000 – Exemption Certificate General as the most used form. Additional guidance on acceptable exemption formats can be found here.
There are multiple methods for filing and remitting sales and use tax in Arizona. This includes e-filing through AZ Taxes.gov as well as paper filing with Form TPT-EZ and Form TPT-2.
No, Arizona does not currently offer TPT holidays.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, Arizona imposes the following point of sale fees:
Generally, Arizona does not apply TPT to shipping charges is seperately stated on an invoice.
Arizona is an origin based sourcing state.
Arizona businesses or individuals selling tangible personal property or certain services to Arizona consumers may need register to collect TPT when meeting qualifying requirements. More information on Arizona business tax registration can be found here.
For more information on U.S. sales tax compliance across all 50 states, check out our:
Looking for an easier way to manage TPT in Arizona and beyond? Learn how Sovos simplifies compliance.
The State of Alaska sales tax system is unique compared to other U.S. states. Alaska does not impose a statewide sales and use tax, making it one of the few states without a general retail sales tax. Instead, sales tax in Alaska is administered at the local level, where cities and boroughs are permitted to levy their own taxes under Alaska tax policy.
Because of this decentralized structure, Alaska tax rates can vary significantly depending on the municipality. Businesses operating in Alaska must understand Alaskan municipal taxes to remain compliant.
At the state level, the answer is no—Alaska does not have a state sales tax. However, many local jurisdictions impose a form of Alaska retail tax, which applies to sales of goods and services within their boundaries. These local sales taxes fund municipal services and infrastructure.
Examples of Alaska local taxing jurisdictions include Juneau, Ketchikan Gateway Borough and Sitka, Other municipalities, such as Anchorage and Fairbanks, do not impose a general sales tax but may levy specific excise-style taxes on items like alcohol, tobacco, or short-term lodging.
While Alaska business taxes do not include a statewide sales tax, many municipalities impose local sales and use taxes on common retail transactions.
Typical taxable items and services under Alaskan municipal taxes include:
To streamline compliance for remote sellers, several Alaska local governments have entered into an intergovernmental agreement creating the Alaska Remote Seller Sales Tax Commission (ARSSTC). This commission provides centralized administration for participating jurisdictions that have adopted a uniform local sales tax code.
Under ARSSTC rules, remote sellers and marketplace facilitators may be required to collect sales tax in Alaska when statewide sales thresholds are met.
Physical nexus is established when a business has a tangible presence in a local jurisdiction. Physical presence may trigger collection obligations for Anchorage sales tax, Juneau sales tax, or other local taxes, depending on the jurisdiction.
The ARSSTC administers economic nexus for remote sellers. If your business has statewide gross sale of $100,000 or more from sales of property, products, or services delivered into Alaskayou may be required to register and collect applicable Alaskan municipal taxes through the commission.
More information is available on the ARSSTC Remote Seller Sales Tax Code webpage.
Certain sales in Alaska locals can be exempt from the sales and use tax requirements, though exemptions vary by municipality.
Common local exempt products and services include:
Additionally, Alaska locals exempt sales to certain entities from sales and use tax, including the following:
Because Alaska does not impose a statewide sales tax, there are no state-level exemption certificates. Sellers and purchasers must contact the applicable local jurisdiction directly to determine documentation requirements for exemptions under Alaskan municipal taxes.
Since there is no state-level sales tax, businesses must file returns and remit tax directly to the applicable local jurisdiction or through the ARSSTC if the locality participates. Filing frequencies, tax rates, and reporting requirements vary by municipality.
Yes, Alaska locals do offer sales tax holidays. However, many are limited to physical sales in the locality or seasonal.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. At the state level, Alaska imposes a tire fee on new tires sold. With tired sold with studs over a certain weight having an additional fee. Locals do not generally impose point-of-sale fees.
Locals generally include shipping charges as a part of the sales price and therefore such charges are subject to tax.
Alaska locals generally employ destination based sourcing.
Alaska has no state level tax; taxpayers may contact the local jurisdiction or through AARSTC if applicable.
For more information on U.S. sales tax compliance across all 50 states, check out our:
Looking for an easier way to manage sales tax in [State] and beyond? Learn how Sovos simplifies compliance.
Understanding sales tax in Connecticut, including who must collect it, what’s taxable, and how to file, is essential for staying compliant—especially as rules evolve. This Connecticut sales tax guide breaks down the state of Connecticut sales tax rate, nexus requirements, exemptions, and filing obligations for businesses operating in or selling into the state.
The Connecticut sales tax rate is 6.35% statewide. Unlike many states, Connecticut does not allow local jurisdictions to impose additional sales taxes, meaning the sales tax rates for Connecticut are consistent across the state.
Connecticut sales and use tax applies to the sale of tangible personal property and certain enumerated services. Sellers selling taxable goods and/or services are required to collect and remit sales tax to the state.
Examples of taxable items and services include:
Connecticut also imposes a luxury tax, which applies in lieu of the standard Connecticut sales tax rate on certain high-value items, including certain motor vehicles, jewelry and clothing and footwear above threshold amounts.
A seller is liable to collect and remit Connecticut sales tax if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Connecticut
Connecticut enforces economic nexus for remote sellers. You must register and collect sales tax in Connecticut if, during the previous calendar year, your business had:
Meeting either threshold establishes Connecticut sales tax nexus.
Certain sales in Connecticut are considered generally exempt from the state’s sales and use tax requirements. Commonly exempt products and services include:
The state also exempts sales made to qualifying entities, including:
To claim an exemption, a purchaser must provide an exemption certificate to the seller at the time of sale. The seller keeps the certificate and may sell property or services without charging sales tax. Connecticut requires different exemption certificates for different types of exemption. To obtain the relevant form for a specific exemption, consult the Department of Revenue Services full list of certificates here.
Connecticut generally requires all businesses to e-file their sales and use taxes online through myconneCT.
Yes, Connecticut does offer sales tax holidays.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, Connecticut imposes the following point of sale fees:
Generally, Connecticut applies sales tax to shipping and delivery charges.
Connecticut is destination based for sourcing sales tax.
Businesses or individuals selling tangible personal property or certain services to Connecticut consumers may need to register to collect sales tax when meeting qualifying requirements. New business registrations must be completed online through myconneCT. More information may be found here.
For more information on U.S. sales tax compliance across all 50 states, check out our:
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New Jersey imposes a statewide sales and use tax rate of 6.625%. The state allows some cities to impose motor vehicle rental tax and there is one district sales tax for Kapkowski Road Landfill Reclamation District Project. Businesses should monitor New Jersey sales tax rates closely to ensure accurate compliance.
New Jersey sales and use tax applies to the sale of tangible personal property and certain enumerated services. Sellers selling taxable goods and/or services are required to collect and remit sales tax to the state, following New Jersey sales tax rules.
Examples of taxable items include:
A seller is liable to collect and remit New Jersey sales tax if they meet the state’s nexus requirements. Nexus can be established through either physical or New Jersey economic nexus presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of New Jersey.
New Jersey enforces economic nexus for remote sellers. If your business has:
you may be required to register for and collect New Jersey sales tax.
Certain sales are generally exempt from New Jersey sales tax rules and regulations.
Additionally, New Jersey exempts sales to certain entities from the sales/use tax, including the following:
To claim an exemption, an entity must provide an exemption certificate with the sale. The Treasury accepts Form ST-3NR (Resale) and Form ST-4 (Exempt Use) as the most commonly used forms.
Additional guidance on acceptable exemption formats can be found in New Jersey Tax Topic Bulletin S&U-6.
New Jersey offers multiple methods for filing and remitting sales and use tax:
Some sellers must also make monthly payments. You must make monthly payments only if you:
No, New Jersey does not currently offer sales tax holidays
No. Charges for demolition services are not subject to tax.
Yes. Debris removal services are servicing or maintaining real property and, as such, the charges are subject to tax.
No. The construction of a garage is an exempt capital improvement and as such the charges are not subject to tax. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document this exemption.
Yes. New Jersey accepts Simplified Electronic Returns (SER) from any seller or tax provider that can transmit the return properly. You don’t need to be in the SST Model 1 program to use the SER—providers like Sovos can file on behalf of any client who opts into that method.
New Jersey businesses or individuals selling tangible personal property or certain services to New Jersey consumers may need to register to collect sales tax when meeting qualifying requirements. More information may be found here.
For more information on U.S. sales tax compliance across all 50 states, check out our:
State-by-State Sales Tax Guide
Looking for an easier way to manage sales tax in New Jersey and beyond? Learn how Sovos simplifies compliance.
Iowa imposes a statewide sales and use tax rate of 6%. The state does allow local jurisdictions to levy additional sales taxes.
Iowa sales and use tax applies to the sale of tangible personal property and certain enumerated services. Sellers selling taxable goods and/or services must comply with Iowa tax laws and remit taxes to the state.
Examples of taxable items and services include:
A seller is liable to collect and remit Iowa sales tax in Iowa if they meet the state’s nexus requirements. Nexus can be established through either physical or economic presence.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Iowa.
Iowa enforces economic nexus for remote sellers. If your business has over $100,000 in sales during the previous calendar year, you may be required to register for and collect Iowa sales tax.
Learn more on the Remote Sellers & Marketplace Facilitators page on the Iowa Department of Revenue website.
Certain sales in Iowa are considered generally exempt from the sales and use tax requirements.
Additionally, Iowa exempts sales to certain entities from the sales/use tax, including the following:
To claim an exemption, an entity must provide an exemption certificate with the sale. The Treasury accepts form 31-014 as the most commonly used form.
Iowa offers multiple methods for filing and remitting sales and use tax:
Yes, Iowa is part of the Streamlined Sales Tax (SST) initiative, a multi-state agreement designed to simplify and standardize sales tax rules.
Yes, Iowa does offer a sales tax holiday.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, Iowa imposes the following point of sale fees:
Generally, Iowa exempts shipping/handling/delivery charges so long as they are separately stated.
Iowa is destination-based for sales tax.
Yes. Iowa accepts Simplified Electronic Returns (SER) from any seller or tax provider that can transmit the return properly. You don’t need to be in the SST Model 1 program to use the SER—providers like Sovos can file on behalf of any client who opts into that method.]; For more information regarding permitted forms for returns, please reference the Iowa Department of Taxation Streamlined Sales Tax website.
Iowa businesses or individuals selling tangible personal property or certain services to Iowa consumers may need register to collect sales tax when meeting qualifying requirements. More information may be found here
For more information on U.S. sales tax compliance across all 50 states, check out our:
State-by-State Sales Tax Guide
Looking for an easier way to manage sales tax in Iowa and beyond? Learn how Sovos simplifies compliance.
The District of Columbia (D.C.) imposes a statewide sales and use tax rate of 6%. Unlike other states, local jurisdictions cannot levy additional taxes, which simplifies compliance compared to areas with varying local sales tax rates.
District of Columbia sales and use tax applies to the sale of tangible personal property and certain enumerated services. Sellers of taxable goods and services must collect and remit sales tax in DC according to Washington DC tax laws and DC tax regulations.
Examples of taxable items and services include:
Some services are taxable in addition to those listed above. For details, consult the definitions of “retail sale” and “sale at retail” in DC Code 47-2001. Businesses should review these carefully to avoid errors in DC sales tax filing.
Yes, similar to many states, District of Columbia imposes a use tax. This complements Washington DC taxes on retail transactions.
A seller must collect and remit retail sales tax in DC if they meet nexus requirements, which can be physical or economic.
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the District of Columbia.
District of Columbia enforces economic nexus for remote sellers. If your business has:
you may be required to register for and collect District of Columbia sales tax.
Learn more on the District of Columbia’s Remote Seller and Marketplace Seller FAQ’s.
Certain sales in District of Columbia are considered generally exempt from the sales and use tax requirements.
Examples of exempt items include:
Foods that qualify for purchase with SNAP benefits are also exempt from District of Columbia sales tax.
To claim an exemption, an entity must provide an exemption certificate with the sale. The Treasury accepts this as the application OTR-308.
Additional guidance on acceptable exemption formats can be found in FAQ’s OTR MyTax DC.
An organization recognized as a tax-exempt entity by the Internal Revenue Service (IRS) is not automatically recognized as a tax-exempt entity under the laws of the District of Columbia. Some exemption requests will require taxpayers to sign up for a OTR MyTax DC account which includes:
District of Columbia does not offer multiple methods for filing and remitting sales and use tax:
Instructions can be located here: Sales and Use Tax Instructions
No paper filing available
No, the District of Columbia is not part of the Streamlined Sales Tax (SST) initiative, a multi-state agreement designed to simplify and standardize sales tax rules. More information concerning SST may be found here.
No, the District of Columbia does not currently offer sales tax holidays.
Point-of-sale fees are fixed amount or rate-based assessments levied on certain products or services at the time of sale and paid by the final consumer at retail. For example, District of Columbia imposes the following point of sale fees:
District of Columbia businesses or individuals selling tangible personal property or certain services to District of Columbia consumers may need register to collect sales tax when meeting qualifying requirements. More information may be found here: FR-500 New Business Registration
Or
Through MyTaxDC – FAQ’s
For more information on U.S. sales tax compliance across all 50 states, check out our:
State-by-State Sales Tax Guide
Looking for an easier way to manage sales tax in D.C and beyond? Learn how Sovos simplifies compliance.
Sovos has been officially registered as an accredited Plateforme Agréée (PA) by the French Tax Authority (DGFIP), marking a significant milestone in supporting France’s upcoming mandatory e-invoicing and e-reporting mandate. This accreditation follows successful completion of rigorous application requirements and comprehensive interoperability testing with the Public Portal of Invoicing (Portail Public de Facturation).
PA accreditation is required for any service provider that will transmit electronic invoices between businesses and report transaction data to the French tax authorities under the new mandate. As an accredited platform, Sovos is authorized to exchange structured invoices with other certified platforms, manage invoice lifecycle statuses, update the Central Directory of electronic addresses, and transmit mandatory data flows to the tax administration.
Having secured PA accreditation, Sovos will participate in the upcoming pilot phase launching in late February 2026, which will allow users to gain early operational experience with the new framework ahead of the mandatory compliance deadline in September 2026.
The beverage alcohol industry operates under complex rules, which vary by state. While importers are part of the “supplier” tier—similar to wineries, distilleries, and breweries—they are treated differently under federal and state regulations. This distinction is especially notable when it comes to direct-to-consumer (DtC) wine shipping.
Currently, 48 states plus D.C. permit some measure of DtC wine shipping, but most restrict licenses to businesses that hold both:
Some 13 states allow retailer licensees to ship wine DtC, six allow beer shipping, and four allow spirits shipping. So, can importers ship DtC under these laws? In most cases, the answer is no, unless they hold additional domestic production or retail licenses.
Importers must comply with federal requirements, including holding a TTB-issued Basic Importer’s Permit. However, federal law does not have any bearing on DtC shipping permissions, which are governed solely by the state into which alcohol is being shipped. TTB rules for dtc shipping set the federal baseline, but state laws ultimately determine whether importers can participate in DtC sales. So, while importers may be positioned similarly to wineries under federal law, unless they meet the specific requirements of the different states, they cannot ship their imported products DtC.
Only Mississippi and Wyoming explicitly allow importers to apply for DtC licenses in their laws. Most other states limit DtC shipping licenses to domestic wine manufacturers with a state license that grants production permissions (such as the California Type 02 Winemaker license). Some states will issue DtC licenses to retailers, though such permissions are very limited and vary by state. Since importers generally lack producer or retailer licenses, they are often unable to obtain DtC licenses.
DtC eligibility for alcohol importers is typically limited by state laws that prioritize domestic producers and retailers. Importer direct-to-consumer laws are often more restrictive than those for domestic producers, limiting the ability of importers to participate in DtC shipping. Note, however, that domestic producers with an Importer’s license can obtain DtC licenses, though they may face restrictions on shipping the wines they import.
To enter the DtC shipping market, importers have two potential paths:
Importers may try to obtain additional licenses, but this approach is risky. Many states prohibit cross-tier ownership, and retail licenses may require physical stores and walk-in inventory. Violating trade practice laws can result in severe penalties, so understanding the limits on which licenses an importer is eligible for is essential.
Importers, including domestic wineries that also operate as importers, who manage to ship DtC will need to comply with each states’ individual laws. Of critical importance to importers, many states prohibit DtC shippers from shipping wines that they do not personally produce or own, which could severely limit the shipping of imported wines. But failure to follow any DtC shipping law can bring real trouble, including the possibility of fines and license revocation. Navigating DtC compliance is critical to avoid legal liability and loss of market access.
Rather than pursuing risky or non-compliant strategies, importers are better served by partnering with licensed producers, ensuring full compliance with all trade practice laws, and leveraging technology to manage the complex regulatory requirements of the DtC shipping landscape. Staying up to date with dtc shipping regulations is essential for importers to avoid penalties and ensure legal compliance.
Sovos ShipCompliant supports importers by providing tools that automate compliance checks, manage licenses and reporting, and ultimately reduce risk for businesses navigating the intricate DtC shipping laws. These solutions help importers stay up to date with DtC shipping regulations and licensing requirements for DtC shipping.
Until laws change, importers face significant barriers to DtC shipping. While options exist, they are limited and often risky. Compliance remains critical for any importer considering DtC strategies.
Only by following the laws of the states they want to ship into, which do often prohibit importers from shipping at all.
Generally no, unless they also qualify as a producer or retailer under state law.
They do not meet state requirements for producer or retailer status. Most DtC laws are designed to support domestic producers, which has meant that importers (and foreign producers) are largely ineligible for DtC shipping licenses.
A couple of states will directly license importers. Otherwise, an importer will need to hold additional production or retail licenses to ship DtC.
DtC shipping done illegally can result in fines, license revocation, and legal penalties.
Sovos ShipCompliant helps importers manage license management and automate reporting.
As 2025 winds to a close, we at Sovos ShipCompliant look back at all that happened and changed for the dynamic industry we serve. Indeed, 2025 proved to be an eventful year for the direct-to-consumer (DtC) shipping market and the beverage alcohol industry writ large.
Beyond these more proximate developments, 2025 also saw the twentieth anniversary of both the Granholm v. Heald Supreme Court ruling, which ushered in the modern direct-to-consumer (DtC) wine shipping market, along with the founding of Sovos ShipCompliant.
Twenty years can be a long time for market, and it has been our absolute privilege to work alongside so many fantastic wineries and the other support services, like fulfillment houses, POS, and ecommerce platforms, and our other integrated partners, that have helped to grow the DtC wine shipping into a multibillion-dollar annual market.
There was nothing guaranteed about this success in 2005 and so we also honor the many incredible people who have built Sovos ShipCompliant along with all those who made the DtC shipping market into what it is, from organizations like Wine Institute and Free the Grapes!, to the consumers who were moved to lobby their representatives, and of course, the amazing winemakers and suppliers that strive daily to make the world a little better by providing consumers with fantastic wines to enjoy with family and friends.
Still, time marches on, bringing new and changed concerns to manage, and the beverage alcohol industry is not immune. So, while we can reflect on all we have accomplished over the last 20 years, this moment is also a time to review all that happened for DtC wine in 2025.
The biggest news from 2025 was the enactment of three separate state laws enabling new DtC wine shipping permissions.
Over the year, Arkansas, Mississippi, and Delaware all passed laws designed to provide their residents with greater access to the national wine market. With these new laws in place, that leaves Utah as the only state without any form of DtC shipping rules on its books (and Rhode Island as the only state that requires an onsite sale prior to shipping).
Of course, just because DtC shipping laws are in place in these states doesn’t mean there aren’t restrictions and limitations—some of them severe—on wineries servicing consumers there.
Arkansas prohibits DtC shipping into any dry region of the state, which, with 53 dry or mixed counties, restricts much of the state.
Mississippi doesn’t permit DtC shipping of any wines that are listed for distribution through the state control system, effectively blocking wineries from engaging in concurrent DtC and wholesale sales in the state.
Delaware’s new law includes the most onerous restrictions, including:
Indeed, in its current form, Delaware’s law is so restrictive that it is not recommended for any winery to pursue shipping there when the law takes effect in 2026.
Maine extended its container redemption program to DtC shipped wines, effective on July 1. This new requirement has proved to be an extreme burden on wineries as many have found it nearly impossible to comply with the registration requirements.
While there are perfectly legitimate reasons for states to look at extending their bottle bill requirements to remote shippers, the states must make these programs accessible and readily manageable for everyone.
Wine was not the only product type affected by state law changes this year, as California (finally!) enacted a Granholm-compliant DtC shipping law for distilled spirits.
The state had been operating for several years under a “temporary” law that permitted California-based distilleries only to DtC ship, for which it was at great risk of litigation. As such, the new law, which makes DtC shipping available to all U.S. distilleries equivalent in size to California craft distilleries (150,000-gallon annual production cap), is extremely welcome. Less welcome, though, is the one-year term for the new law, which will need to be renewed by the state to extend past December 31, 2026.
2025 was also a rather complicated year at the federal level, due to:
Looking at the overall beverage alcohol market, things were still challenging in 2025 with many analysts noting broad declines in consumption across all product types and consumer groups. Even more voguish products, like RTD cocktails and seltzers, have been performing less robustly than they had recently.
For the DtC wine shipping market, 2025 has generally seen declines in shipping volume and value continuing at a similar rate as the last two years. While some of this might still be attributed to a return to normal from the heady years of the pandemic shutdown, it is undeniable that the DtC wine shipping is facing an extended downturn. Even if the decline in shipments parallels the broader struggles of the wine and alcohol markets, it is little comfort to wineries looking for a return to growth. There are some signs that the 2025 holiday shipping season may be surprisingly robust, which may signal things could level out in 2026, though no one is holding their breath.
Over the last 20 years, we at Sovos ShipCompliant have had the privilege of becoming a key member of the DtC wine shipping market and the beverage alcohol industry writ large. Through the years, we have seen a great deal of change, largely for the better, with greater access and availability to the tremendous number of delicious beverages produced and sold in this country. As we look back at all of the good we have seen and been part of, we will raise our glasses to many more years of supporting this exciting market.
Arkansas, Mississippi, and Delaware passed new laws, while Maine added container redemption requirements, and California updated distilled spirits shipping rules.
All states except Utah permit some form of DtC wine shipping; Rhode Island requires onsite purchase before shipping.
Tariffs were imposed and removed multiple times, creating uncertainty and operational challenges.
Signs suggest stabilization of the DtC wine market, but growth will depend on consumer demand.