Beginning April 1, 2026, Maryland will implement a PaintCare Recovery Program. The program will impose various fees on the sale of architectural paint in the state to fund recycling and disposal. More information may be found here.
Customer Story
How Hyundai Motor America
Modernized U.S. Sales Tax
Compliance During SAP
S/4HANA Migration
Products
Sovos GTD for SAP
Company Information
$300M+
Revenue
400+
Employees
Automotive
manufacturing &
distribution
Industry
40+
Countries
Key Success Factors
Al Chan, Senior Tax Manager at Hyundai Motor America, identified critical best practices that ensured successful implementation:
Involve Tax AND IT early
“Cannot be reiterated enough”—HMA started scoping S/4HANA adaptor requirements in early Q1 2025, enabling successful installation and implementation by Q2-Q3 2025 for internal testing.
Define clear system ownership
“Clarity of responsibilities is key to successful daily operation”—HMA established clear protocols: HMA as user, HAEA as administrator, and Sovos support for complex cases.
Monitor tax logic
during testing
“Too many hands can cause unintended confusion”—Ensure tax experts validate all logic settings during testing phases, as administrators aren’t tax experts by nature. HMA discovered some erroneous defaults post-testing that required correction.
Leverage vendor expertise
“It is often helpful whenever Sovos team conducts webinars for updates on state/local taxing policies”— Staying current with regulatory changes through vendor resources reduces surprises and improves compliance.
Overview
Hyundai Motor America (HMA), the U.S. subsidiary of South Korea-based Hyundai Motor Company, operates a complex wholesale distribution network serving 855+ independent dealers nationwide. As a leading automotive manufacturer with facilities spanning California, Alabama, and Georgia—including the new $12.6 billion Metaplant America producing up to 500,000 electric vehicles annually—HMA needed a future-proof tax compliance solution to support its SAP S/4HANA migration.
With operations encompassing wholesale vehicle sales, software subscriptions, inspections, and consulting services, HMA required a scalable, automated tax determination engine capable of handling high-volume transactions across all U.S. jurisdictions while maintaining continuous business operations throughout the ERP transformation.
The Challenge
Operating at enterprise scale with complex distribution channels, HMA faced mounting pressures during its SAP S/4HANA migration:
Manual tax logic maintenance: Legacy processes required constant manual system resets when default settings changed, creating operational risk and slowing down tax teams
ERP transformation risk: Needed to maintain continuous tax compliance accessibility throughout the S/4HANA testing and migration phases without business disruption
Complexity at scale: Managing tax determination across 13,000+ U.S. jurisdictions for high-volume daily invoice batches, employee car leases, and diverse product categories
Limited system integration: Before full GTD utilization, affiliates experienced time-consuming data extraction from SAP for monthly reconciliation and difficulty mapping SKU categories for taxability—creating audit exposure
The company recognized that tax compliance could not be an afterthought in their digital transformation—it had to be a core component of their S/4HANA strategy to de-risk the migration and enable long-term scalability.
The Solution
To address these challenges, Hyundai Motor America implemented Sovos’ comprehensive tax determination platform as part of their S/4HANA migration strategy:
Sovos GTD (Global Tax Determination): Delivered cloud-native, realtime tax determination with certified SAP S/4HANA integration, running seamlessly with BTP and ECC without middleware requirements.
SAP Data Mapper: Enabled plug-and-play connectivity for automated tax calculation flows, eliminating technical friction during the ERP transformation.
Unified tax logic and rules engine: Provided one-stop access for administrators (HAEA) and Accounts Receivable teams to manage dealership addresses, program Goods/Service Codes (GSCs), and handle new product launches effortlessly.
Real-time rates for all U.S. jurisdictions: Critical for behind-the-scenes employee car lease lookups, dealer transactions, and ensuring accuracy across 13,000+ tax jurisdictions.
Usage-based pricing and modular design: Made the GERP adaptor installation, testing, and implementation process convenient and efficient for HMA’s administration team.
The Results
Seamless ERP Transformation
Quick transition: Sovos adaptor installed in test environment (July 2025) with successful go-live on SAP S/4HANA GERP (Q1 2026) with no major disruptions to business units.
Continuous accessibility: Maintained full GTD functionality throughout entire testing and migration phases, ensuring zero downtime for tax determination.
Reduced time-to-value: Early scoping in Q1 2025 enabled successful implementation by Q2-Q3 2025, demonstrating cross-functional alignment between Tax and IT.
Operational Efficiency Gains
Eliminated manual lookups: One-stop convenience for Tax department research replaced time-consuming searches across multiple jurisdiction websites.
Faster audit preparation: Accelerated retrieval of Sales Transaction Journals and detailed tax rate breakdowns (state/local/city) for reconciliation.
Streamlined AR processes: Made new product and service launches effortless with constantly updated GSC listings.
Real-time validation: Daily invoice batches processed through Sovos GTD with automated tax application on taxable SKUs, enabling indirect tax to operate seamlessly in the background.
Risk Mitigation & Compliance
Increased audit readiness: Comprehensive audit trails and accurate tax rate application across all jurisdictions reduced exposure.
Improved data accuracy: Full GTD utilization replaced limited affiliate integration that previously caused mapping difficulties and audit risk.
De-risked SAP S/4HANA migration: Tax compliance integration prevented transformation delays and ensured continuous operations.
Future-ready architecture: Cloud-native, scalable infrastructure positions HMA for continued growth and potential global expansion.
Cross-functional alignment: Successfully demonstrated collaboration between Tax, IT, and operations teams from scoping through go-live.
Key Metrics
800
Monthly invoices processed
75%
Manual effort reduction
90%
Accuracy improvement
50%
Audit risk reduction
< 3 months
Payback period
Why Sovos?
Hyundai Motor America selected Sovos due to its unique ability to:
Deliver seamless SAP integration: Fully certified with S/4HANA, BTP, and ECC—critical for supporting HMA’s ERP transformation without middleware complexity or business disruption.
Provide real-time tax determination at scale: Proven ability to handle high-volume daily transactions across all 13,000+ U.S. tax jurisdictions with continuous accuracy.
Enable unified administration: One-stop platform for tax logic, Goods/Service Code management, and real-time rate lookups—simplifying operations for tax teams and Accounts Receivable.
Support with deep compliance expertise: Trusted partner providing ongoing regulatory updates, webinars, and technical support to keep HMA current with evolving tax requirements.
Looking Ahead
By partnering with Sovos for its SAP S/4HANA migration, Hyundai Motor America successfully de-risked its ERP transformation while modernizing its U.S. sales tax compliance infrastructure. The implementation delivered seamless integration, reduced manual effort, improved audit readiness, and positioned HMA for scalable growth.
With Sovos GTD operating continuously in the background, HMA’s indirect tax compliance now runs automatically across its complex dealer network, manufacturing operations, and diverse product lines—enabling the tax team to focus on strategic initiatives rather than manual processes. The successful collaboration between HMA’s Tax and IT teams, combined with Sovos’ deep SAP expertise, created a future-proof tax strategy that turns regulatory complexity into a competitive advantage.
“With technology being more rapid every day, it is of utmost importance that processes be more automated while ensuring accuracies prevail. Given our volume of sales and the number of jurisdictions that HMA has nexus in, it is vital for HMA’s usage of Sovos GTD in order to minimize inefficiencies and delays.”
AI Chan Senior Tax Manager, Hyundai Motor America
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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.
The Economic Case for Replacing State Income Taxes
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.
Migration and Brain Drain: Workers and businesses can readily avoid high income taxes by re-locating to lower tax jurisdictions, with high income individuals having the most geographic flexibility. Increasing income taxes can lead to population losses so severe that they lead to no net revenue gain.
Stifling Innovation and Entrepreneurship: Innovators will not only choose to migrate to lower income tax states but those that remain will be less incentivized to innovate in response to lower after-tax returns. High corporate income taxes discourage startup formation.
Displacing Business Activity: High income taxes encourage businesses to move operations into lower tax jurisdictions, especially for businesses that already have locations in multiple states and can readily shift between them.
The Tradeoffs: Replacing Income Taxes with Sales Taxes
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.
Criticism of Eliminating State Income Taxes
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:
All healthcare costs, excluding insurance premiums but including those covered by private insurance, Medicare, and Medicaid
Financial services, including the value of banking services even though they are generally funded by depositor fees,
Services provided by nonprofits, including scholarships and subsidies.
Transactions not legally taxable, including internet access and purchases from the USPS.
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.
Real-World State Tax Reforms
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.
Is Eliminating State Income Tax a Sustainable Long-Term Strategy?
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.
The Rhode Island Department of Revenue recently found that sales of access to online databases should be subject to sales and use tax as this is considered the sale of vender-hosted prewritten computer software. In the decision, the Department noted that “searchability” (i.e., the ability to research/retrieve information) from a database is a main factor for the taxable determination. Please reference Case No. 22-T-050; No. 2026-01 for the full decision.
We’re proud to sponsor the E-invoicing Exchange Summit. As the Middle East continues to establish itself as a global fintech hub, with the UAE at the forefront of digital tax transformation. The 2026 E-Invoicing Exchange Summit will explore regional e-invoicing requirements, real-time compliance readiness and the technologies shaping the future of digital taxation. Featuring an exhibition of leading solution providers and insights from Alex Pavel on why vendor foresight not deadlines defines real-time readiness, the Summit offers a forward-looking perspective on compliance in an increasingly connected economy.
To review the agenda and registration details click here.
Meeting Venue
Park Hyatt Dubai, Dubai Creek Club St Port Saeed – Dubai
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:
Chicago Amusement Tax
Chicago Personal Property Lease Transaction Tax
Cook County Amusement Tax
West Dundee Food and Beverage Tax
What’s Taxable in Illinois?
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:
Clothing
Prepared food, alcohol, candy, soft drinks
Food for home consumption
Prescription and nonprescription drugs or medicines
Prewritten computer software
Telecommunication services
Sales Tax Nexus in Illinois
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.
Illinois: Physical Nexus
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Illinois
Illinois: Economic Nexus
Illinois enforces economic nexus for remote sellers. If your business has:
Over $100,000 sales in Illinois during the previous calendar year;
you may be required to register for and collect Illinois sales tax.
Certain sales in Illinois are considered generally exempt from the sales and use tax requirements.
Exempt Products and Services
Most services
Software as a Service (SaaS)
Agricultural items
Digital goods
Entity or Use Based Exemptions
Additionally, Illinois exempts sales to certain entities from the sales/use tax, including the following:
Certain qualified nonprofit entities
501(c)(3) and 501(c)(4) organizations
Churches and houses of religious worship
Nonprofit schools, hospitals and homes for children and aged persons
Certain wholesalers
Retailers selling for resale
Industrial processors
Schools
Government
How to Claim Sales Tax Exemption in Illinois
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
Are there any special point of sale fees in Illinois?
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
Does Illinois apply sales tax to shipping charges?
Generally, Illinois does not apply sales tax to shipping charges when the charges are separately stated on the contract or invoice.
For sourcing sales tax, is Illinois origin or destination based?
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.
How to Register for a Illinois Sales Tax License?
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
Additional Resources
For more information on U.S. sales tax compliance across all 50 states, check out our:
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Meeting Venue
The Bellagio Hotel & Casino 3600 Las Vegas Blvd S, Las Vegas, NV 89109
Join Hyundai Motor America and Sovos for a behind-the-scenes look at how a major automotive brand streamlined U.S. sales tax compliance with real-time, SAP-integrated automation.
In this session, Al Chan, Senior Tax Manager at Hyundai, and Vadim Nemtsev, Director of Product Marketing at Sovos, share the joint journey to implement Sovos Global Tax Determination (GTD) — a modern, cloud-native tax engine embedded directly into SAP S/4HANA.
Attend this webinar to discover how Hyundai:
Eliminated manual tax calculations across high-volume transactions
Handled tax determination in all U.S. jurisdictions with precision and speed
Achieved real-time compliance using Sovos’ certified SAP connectors and automated rule updates
Future-proofed tax operations with scalable architecture and regulatory monitoring
This session is ideal for SAP finance, tax, and IT leaders seeking to modernize legacy tax engines, reduce audit risk, and align tax compliance with digital transformation initiatives.
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.
The Tax Compliance Paradox: Why Gaps Persist
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.
Unique Tax Compliance Challenges for Financial Services
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.
Five Complexity Multipliers Unique to FinServ
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.
The SaaS Taxation Time Bomb
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.
Use Tax: The Silent Audit Trigger
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.
The Four Failure Modes
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.
The Real Cost of a Tax Audit for Financial Institutions
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.
The ROI of Getting This Right with Tax Automation
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.
The Perspective Shift
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.
Your Next Move
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.
What’s Taxable in Arkansas?
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:
Clothing
Prewritten computer software delivered in tangible format
Over-the-counter drugs without a prescription
Telecommunication services
Medical equipment
Computer software maintenance contracts
Sales Tax Nexus in Arkansas
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.
AR: Physical Nexus
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Arkansas.
AR: Economic Nexus
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:
Over $100,000 in sales, or
More than 200 separate transactions made within Arkansas.
Simplified Electronic Return (SER) for SST participants and their affiliates
Paper filing, including the Consumer’s Use Tax Report (Form CU1)
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).
Frequently Asked Questions
Is Arkansas a part of the Streamlined Sales Tax (SST) initiative?
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.
Does Arkansas have sales tax holidays?
Yes. Arkansas offers an annual back-to-school sales tax holiday, during which qualifying school supplies, clothing, and accessories may be purchased tax-free.
Are there any special point of sale fees in Arkansas?
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.
Does Arkansas apply sales tax to shipping charges?
In most cases, Arkansas considers shipping, freight, and transportation charges to be part of the taxable sales price when the underlying product is taxable.
What is the current sales tax rate in Arkansas?
The current sales tax rate in Arkansas is 6.5%.
For sourcing sales tax, is Arkansas origin or destination based?
Arkansas is destination based for sales tax sourcing.
Can I use the Simplified Electronic Return (SER) in Arkansas if I’m not in the SST Model 1 program?
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.
How to Register for a Arkansas Sales Tax License?
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
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.
What’s Taxable 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:
Clothing and footwear
Prepared food and beverages
Prewritten computer software
Non-prescription medical items or drugs
Software as a Service (SaaS)
Building materials and supplies
Sales Tax Nexus in Kansas
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.
Kansas: Physical Nexus
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Kansas.
Kansas: Economic Nexus
Kansas enforces economic nexus for remote sellers. If your business has:
Over $100,000 in sales, or
More than 200 transactions in Kansas during the previous calendar year;
you may be required to register for and collect Kansas sales tax.
Certain sales in Kansas are considered generally exempt from the sales and use tax requirements.
Exempt Products and Services
Most services (unless Kansas statutes specify otherwise)
Food and food ingredients
Prescription drugs
Custom software
Newspapers and periodicals on subscription
Entity or Use Based Exemptions
Additionally, Kansas exempts sales to certain entities from the sales/use tax, including the following:
Certain qualified nonprofit entities
501(c)(3) and 501(c)(4) organizations
Churches and houses of religious worship
Nonprofit schools, hospitals and homes for children and aged persons
Certain wholesalers
Retailers selling for resale
Schools
Government
How to Claim Sales Tax Exemption in Kansas
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.
Are there any special point of sale fees in Kansas?
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:
Tire Fee
E911
Does Kansas apply sales tax to shipping charges?
As of July 1, 2023, Kansas does NOT charge sales tax on shipping/delivery charges if they are separately stated on the invoice.
For sourcing sales tax, is Kansas origin or destination based?
Kansas is destination-based state for sales tax purposes
Does Kansas still tax groceries?
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
When is sales tax due on construction materials in Kansas?
The contractor pays sales tax when purchasing materials, not when billing the customer.
Are utilities taxable in Kansas?
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.
Can I use the Simplified Electronic Return (SER) in Kansas if I’m not in the SST Model 1 program?
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.
How to Register for a Kansas Sales Tax License?
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.
Additional Resources
For more information on U.S. sales tax compliance across all 50 states, check out our:
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%.
What’s Taxable in Hawaii?
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:
Clothing
Prewritten computer software
Non-prescription medical items or drugs
Telecommunication services
Certain installation or repair services
Software as a Service (SaaS)
Sales Tax Nexus in Hawaii
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.
Hawaii: Physical Nexus
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Hawaii.
Hawaii: Economic Nexus
Hawaii enforces economic nexus for remote sellers. If your business has:
Varies, Over $100,000 in sales, or
More than 200 transactions] in Hawaii during the previous calendar year;
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.
Exempt Products and Services
Examples of exempt products and services in Hawaii include:
Food and food ingredients
Agricultural items
Medical equipment
Digital goods (digital books, digital audio-visual works, digital audio)
Entity or Use Based Exemptions
Additionally, Hawaii exempts sales to certain entities from the sales/use tax, including the following:
Certain qualified nonprofit entities
501(c)(3) and 501(c)(4) organizations
Churches and houses of religious worship
Nonprofit schools, hospitals and homes for children and aged persons
Certain wholesalers
Retailers selling for resale
Industrial processors
Schools
Government
How to Claim Sales Tax Exemption in Hawaii
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 Filing and Remittance Requirements
Hawaii offers multiple methods for filing and remitting GET:
Forms G-45, G-49 for Semiannual, Quarterly, Monthly or Annually
E-filing through Hawaii Tax Online (HTO)
Filing is always due on the 20th day of the calendar month following the end of the filing period.
Frequently Asked Questions
Is Hawaii a part of the Streamlined Sales Tax (SST) initiative?
Are there any special point of sale fees in Hawaii?
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:
Bottle Deposit Fees
Bag fees imposed by local municipalities
How to Register for a Hawaii Sales Tax License?
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.
Additional Resources
For more information on U.S. sales tax compliance across all 50 states, check out our:
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.
What’s Taxable in Arizona?
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:
Publishing
Contracting
Certain Digital Products
Non-prescription drugs
Clothing
TPT Nexus in Arizona
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.
Arizona: Physical Nexus
Physical presence is created by having a business location, office, warehouse, vehicle, employee, or other representative operating in the state of Arizona.
Arizona: Economic Nexus
Arizona enforces economic nexus for remote sellers. If your business has:
Over $100,000 in sales, during the previous calendar or current year;
you may be required to register for and collect Arizona TPT.
Certain sales in Arizona are considered generally exempt from TPT requirements.
Exempt Products and Services
Certain Food and food ingredients for home consumption
Qualifying agricultural items
Specific medical items
Entity or Use-Based Exemptions
Additionally, Arizona sales tax exemptions apply to certain entities from TPT with proper documentation, including:
Qualifying hospitals
Certain nonprofits
Government
Retailers selling for resale
How to Claim TPT Exemption in Arizona
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.
Arizona Filing and Remittance Requirements
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.
Frequently Asked Questions – Arizona State Sales Tax
Are there any special point of sale fees in Arizona?
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:
E-911
Waste Tire Fee
Does Arizona apply TPT to shipping charges?
Generally, Arizona does not apply TPT to shipping charges is seperately stated on an invoice.
For sourcing TPT, is Arizona origin or destination based?
Arizona is an origin based sourcing state.
How to register for an Arizona TPT License?
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.
Additional Resources
For more information on U.S. sales tax compliance across all 50 states, check out our:
Effective January 1, 2026, Chicago has increased the rate of its Personal Property Lease Transaction Tax from 11% to 15%. Further changes can be found here.
Ohio HB 186, signed by the governor on Dec 19, 2025, cancel’s the expanded August 2026 sales tax holiday as a part of a legislative package aimed at restructuring property taxes in the state. Historically, the sales tax holiday is over a two week period and broadly encompassing.
Chicago will reduce its Motor Vehicle Lessor Tax from $2.75 per rental period to $0.50 per rental period. This tax is imposed on the lease of motor vehicles within Chicago on a daily or weekly basis and is charged per the rental period in the lease agreement. This change is effective on January 1, 2026. Further changes can be found here.
Beginning January 1, 2026, Chicago will impose a new retail liquor tax of 1.5% on the sale of alcoholic beverages purchased for consumption off the premises where the alcohol was purchased. Further changes can be found here.
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.
Does Alaska Have Sales Tax?
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.
What’s Taxable Under Alaska Local Sales Taxes?
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:
Clothing
Digital goods
Non-prescription medical items or drugs
Rentals or leases
Certain installation or repair services
Sales Tax Nexus in Alaska Locals
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.
Alaska Local: Physical Nexus
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.
Alaska Local: Economic Nexus
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.
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:
Professional medical services
Newspapers
Certain building materials or construction services
Select medical equipment
Entity or Use Based Exemptions
Additionally, Alaska locals exempt sales to certain entities from sales and use tax, including the following:
Certain qualified nonprofit entities
501(c)(3) and 501(c)(4) organizations
Senior citizens
Retailers selling for resale
Schools
Government
How to Claim Sales Tax Exemption in Alaska
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.
Alaska Filing and Remittance Requirements
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.
Frequently Asked Questions – Sales Tax in Alaska
Do Alaska locals have sales tax holidays?
Yes, Alaska locals do offer sales tax holidays. However, many are limited to physical sales in the locality or seasonal.
Are there any special point of sale fees in Alaska?
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.
Do Alaska locals apply sales tax to shipping charges?
Locals generally include shipping charges as a part of the sales price and therefore such charges are subject to tax.
For sourcing sales tax, are Alaska locals origin or destination based?
Alaska locals generally employ destination based sourcing.
How to Register for an Alaska Sales Tax License?
Alaska has no state level tax; taxpayers may contact the local jurisdiction or through AARSTC if applicable.
Additional Resources
For more information on U.S. sales tax compliance across all 50 states, check out our:
