This blog was last updated on September 12, 2025

Earlier this year, the CFO of a mid-sized manufacturing firm received an audit notice from the state of Illinois. Nothing unusual, these things happen. Their sales tax systems were clean, fully automated, and had passed similar audits before.  

But this time, the problem wasn’t sales tax. The audit focused instead on something they hadn’t given much attention to: use tax. 

It started with a few untaxed purchases from out-of-state vendors. Then it widened to include P-Card transactions, untaxed software subscriptions, and some drop shipments from a newly acquired business unit. Within weeks, the state auditor had flagged over $800,000 in missed use tax accruals, plus interest and penalties. 

“It blindsided us,” the CFO later admitted. “We thought our sales tax systems had us covered. No one told us that use tax was where the real risk lives.” 

Use Tax: The Quiet Killer in Tax Compliance 

For companies doing business across the U.S., sales tax is the star of the show. It’s front-facing, calculated at the point of sale, and usually plugged into an ERP or ecommerce engine. But use tax? That’s a backstage liability. It applies when tax isn’t charged by the vendor and your organization is on the hook to self-assess and remit it. 

And that’s exactly what makes it dangerous. 

Use tax often hides in places where automation doesn’t reach: 

• AP invoices from unregistered vendors 
• Import transactions 
• P-Card purchases that bypass tax workflows 
• Services, SaaS, and non-inventory spend that fall through the cracks 

It’s rarely visible, rarely audited internally, and, increasingly, the first place auditors go looking for revenue. 

Why States Are Targeting Use Tax 

State revenue agencies have quietly recalibrated their audit playbooks. They’re no longer wasting time combing through well-governed sales tax systems. Instead, they’re diving deep into AP data, testing vendor logic, and looking for gaps in accrual processes. 

And they’re finding them. 

“We see error rates above 10% in most manual use tax reviews,” one former state auditor told us. “Especially in companies with multiple ERPs or recent acquisitions. That’s where the money is.” 

Unlike sales tax, which is passed through to customers, use tax hits your bottom line directly. Every missed accrual is a liability. Every overpayment is lost cash. And unlike other cost centers, few companies have tools in place to monitor, analyze, or optimize use tax activity. 

What Makes Use Tax So Complex?  

• The larger and more complex your organization, the worse the problem becomes. A shared services model might centralize AP but not tax logic. 
• A recent acquisition might double your vendor count and break existing rules. 
• A reliance on spreadsheets might let errors accumulate for years. 
• A high-volume P-Card program might be saving procurement time and quietly generating massive tax exposure. 

One Fortune 100 manufacturer discovered over $4 million in missed accruals after running a reverse audit on their P-Card data. They had robust sales tax tech but use tax was still being handled in Excel. Sound familiar? 

What Makes a “Good” Tax Compliance Strategy? 

It’s not enough to simply add use tax rules to an existing sales tax engine. That’s like patching a tire with duct tape. It might hold up in calm weather, but not under audit pressure. 

What leading finance and tax teams are now doing is reframing use tax as a data problem, not just a compliance one. 

They’re asking: 

• Where is our use tax logic stored? 
• Who owns validation across vendors and invoice types? 
• Can we simulate audit outcomes before they happen? 
• Can we review millions of transactions without weeks of manual work? 

They’re shifting from reactive clean-up to proactive control. 

A Smarter, Modern Option: Sovos OptiTax™ 

That’s where Sovos OptiTax ™ comes in. It’s a new kind of use tax platform – purpose-built, analytics-driven, and ERP-agnostic by design. 

Instead of relying on brittle integrations or consultant-led clean-ups, OptiTax lets companies: 

• Upload AP data from any system 
• Run automated validations, accruals, and corrections 
• Apply tax logic by GL code, vendor, cost center, or geography 
• Visualize exposure, run reverse audits, and prepare audit-ready logs 
• All without replacing your ERP or tax engine 

It’s fast, scalable, and, for many Sovos customers, a revelation. 

A financial services company recently used OptiTax to review two years of AP transactions. The result? $1.8 million in overpaid tax recovered, and $750,000 in under-accruals fixed before an audit could begin. 

What’s at Stake? 

This isn’t just about tax anymore. It’s about cash preservation, audit exposure, internal credibility, strategic control, and so much more. In an era where finance leaders are being asked to do more with less and where audit risk is becoming more data-driven, use tax can no longer be a back-office afterthought. 

It’s time to treat it like the liability it is, and the opportunity it could be. 

Ready to Flip the Script on Use Tax? 

Sovos OptiTax helps companies see what auditors see, before they do. If you’re ready to understand your exposure and take control, let’s talk.