Five Indirect Tax Flashpoints Require Attention

Global regulatory compliance complexity continues to increase. More than eight in 10 of the 1,800 business, compliance and risk leaders who responded to PwC’s Global Compliance Survey 2025 agree.

Indirect tax compliance challenges also escalate. Vertex’s 2025 Mid-Year Rates and Rules report shows sales tax rates and rules are changing at an accelerating clip. Increases account for the lion’s share of these changes. While keeping pace with indirect tax rates and rules presents challenges, companies can mitigate these obstacles with the right combination of tax expertise and automation.

The key lies in managing the indirect tax lifecycle as accurately and efficiently as possible while giving tax professionals sufficient time to contribute to strategic transformation activities and initiatives. To achieve this efficiency, indirect tax groups should monitor and prepare to respond to the following trends and dynamics that will likely influence indirect tax rates and rules for the rest of this year:

1. More Digital Taxes: “Digital taxation” encompasses a broad range of policymaking approaches—most of which indirect tax leaders should expect to see more of in coming months and years. One approach creates a new type of tax on specific digital transactions. For example, Maryland’s Digital Advertising Tax operates more like a gross receipts tax on digital advertising service revenues that companies earn in that state. In other cases, legislatures and policymakers create new sales taxes for select digital transactions or extend existing sales taxes to previously exempt digital services. Earlier this year, Texas amended its longstanding sales tax on data processing services to expand the collection of activities the tax covers (including payroll services, internet hosting, data migration, and website creation, repair, and maintenance). Maryland enacted a new 3% sales tax that took effect July 1 on a broad range of data services and information technology services. As Vertex Director—Chief Tax Office Larry Mellon notes, “Maryland’s general sales tax rate stands at 6%, and the state will impose the new tax—commonly known as the ‘tech tax’—only when no higher rate applies.” Other states will examine these approaches closely and consider following suit. The Multistate Tax Commission’s Uniformity Committee is making progress on a major effort to establish a standard, consistent approach to sales taxation – one scheduled to be finalized in 2026.
2. More Services Subject to Sales Taxes: This spring, Washington state passed a law that expands sales and use tax by subjecting the following professional services to sales tax: IT training services, custom software development, website development, many security services (monitoring and investigation), temporary staffing services, and in-person presentations. Policymakers in other states will scrutinize this law when they consider ways to expand their tax bases.
3. Fewer Property Tax Increases: Property values have soared in recent years—increasing nearly 27 percent faster than inflation since 2020, according to the Tax Foundation: “Legitimate discontent over high property taxes fuels a movement to significantly curtail or even eliminate the property tax.” This trend places greater pressure on state and local governments to reach for other policy levers (e.g., sales tax rates) when addressing budget shortfalls.
4. Implications of the “Big, Beautiful Bill:” The budget reconciliation bill currently calls for a more than $100 billion combined reduction to Medicaid and Supplemental Nutrition Assistance Program (SNAP) funding. If those reductions make the final bill, the “impacts would vary dramatically across states, representing more than 15 percent of state tax revenues in Alaska and nearly 10 percent of state taxes in Ohio, compared to only 3 percent of state taxes in North Dakota and Wyoming,” according to the Tax Policy Center. As a result, many states “will face tough choices among spending cuts (with potential effects on programs and services), tax hikes, or both.” Other federal and global policymaking activities, along with ongoing executive actions, further complicate the picture. “Tax executives face three significant disruptors converging simultaneously—the expiration of certain Tax Cuts and Jobs Act (TCJA) provisions, the implementation of the OECD’s global tax deal, and ongoing regulatory and executive action changes,” according to KPMG, which refers to these disruptions as the “Tax Policy Trifecta.”
5. E-invoicing Compliance Demands: Companies subject to e-invoicing mandates advance and evolve their compliance activities as related real-time reporting requirements come online in a growing number of countries outside the U.S. These efforts highlight the importance of focusing on fundamental compliance knowledge and enablers. First, compliance teams must remember that e-invoicing compliance rules vary by country. Second, compliance teams must understand the unique implications of different clearance models. Third, tax groups should involve themselves deeply in developing e-invoicing capabilities, even if IT or finance groups lead the effort. Fourth, data governance and accuracy represent absolute requirements, given that real- and near-real-time reporting requirements make submitting complete and accurate data essential.

Moving Forward

As I mentioned, indirect tax compliance continues to grow more demanding. Yet, these challenges can help produce innovative solutions. PwC’s compliance survey report indicates that “compliance pioneers” adopt “new approaches to manage compliance requirements more effectively. Rather than simply adding more people and more controls, compliance leaders at these companies rethink their processes, embrace technology and become more strategic in how they help leadership see, take and manage risk.” The second half of this year will require more of pioneering thinking and action.