Indirect Tax Policy: 2024 Trends

A year of pressure points

Election-year gridlock at the federal level, declining state revenues, and rising local tax rates are creating a complicated environment for indirect tax compliance. This white paper, developed with CPA.com, identifies the key trends indirect tax leaders and their CPA advisors should monitor and act on now.

Rates and rules are moving fast

U.S. sales tax rate changes hit a 10-year high in 2023, driven almost entirely by local governments. Among cities, rate increases outnumbered decreases by nearly 5:1. With pandemic-era federal funding winding down and state income and sales tax revenues falling since 2021, expect more fees (retail delivery fees, environmental fees, entertainment district fees) and continued rate increases at the city and county level.

Nexus complexity is not going away

Five years after Wayfair, many companies still have not fully aligned with economic nexus rules, and states are pursuing non-filers aggressively. Every state with a sales tax has adopted economic nexus, but thresholds and definitions vary widely. Physical presence rules still apply too, meaning remote employees and in-state inventory can trigger registration requirements. Keeping departments like sales, HR, and real estate informed about nexus rules helps prevent costly catch-up situations.

Digital taxes remain unsettled

Around 25 states tax digital products or services, and more could follow as the sales tax base shrinks. Many legislatures are watching the outcome of Maryland's digital advertising tax case before advancing their own laws. A Multi-State Tax Commission report expected by end of 2024 could shape significant 2025 legislative activity. Outdated definitions of digital products add another layer of risk.

Audits are increasing and getting sharper

Post-pandemic, sales and use tax audits are on the rise. State auditors are using advanced analytics to select targets more strategically, focusing on industries, prior audit history, and internal controls rather than individual transactions. Key areas of focus include exemption certificate management, product and service classifications, consumer use tax, and remote-worker nexus triggers. Proactive steps like voluntary disclosure agreements and overpayment reviews can reduce exposure.

Technology can help, if you choose wisely

Tax automation is a real advantage when it matches your actual needs. Generative AI, machine learning, and robotic process automation are reshaping what tax technology can do. The paper includes a 10-question framework to help tax teams evaluate their current systems and identify the right path forward: from short-term compliance goals to longer-term technology roadmap alignment.

Indirect tax complexity is not slowing down. This resource gives you a clear picture of where risks are building and how to get ahead of them.