KING OF PRUSSIA, PA — Vertex, Inc. (NASDAQ: VERX) says 2025 delivered one of the most aggressive and complex years for U.S. sales and use taxes in more than a decade, as state and local governments rolled out hundreds of new rates and jurisdictions in a sweeping effort to stabilize revenues.
According to Vertex’s 2025 End-of-Year U.S. Sales Tax Rates and Rules Report, 681 total sales tax rate changes and new rates took effect nationwide during the year. The company tracked changes across 12,414 U.S. tax jurisdictions and found that 335 new city, county, and district taxing jurisdictions were enacted, the highest level in more than 10 years.
Vertex attributed the surge to mounting fiscal pressure on local governments and a growing reliance on indirect taxes to close budget gaps.
Chris Hall, senior tax officer at Vertex, said the scope of change is creating unprecedented compliance challenges for businesses. He said the combination of new taxing jurisdictions and increasingly digital commerce models is reshaping the tax landscape and forcing organizations to adapt more quickly than in recent years.
The report found that the number of newly taxing cities more than doubled in 2025, rising to 108 from 51 the previous year. District taxes also surged, with 219 new district taxes enacted, the highest total since 2017, often tied to funding infrastructure and local services. After three consecutive years of decline, the average state sales tax rate increased to 5.5592 percent, while city-level rate increases outpaced decreases by a ratio of nearly five to one.
Looking ahead to 2026, Vertex warned that pressures are likely to intensify as states face shrinking federal revenue support and rising unfunded mandates. The company said this shift toward greater fiscal self-reliance is accelerating the use of sales and use taxes as primary revenue tools, particularly in large states such as California and New York.
The report also highlighted the growing influence of artificial intelligence on taxable transactions. AI-driven purchasing models, including automated buying through chat-based agents, are changing how and where sales occur, complicating traditional tax rules. At the same time, states are increasingly turning to AI to strengthen audit enforcement and improve tax collections.
To offset revenue shortfalls, policymakers are also experimenting with new approaches, including taxes on digital advertising and expanding sales taxes to services that were previously exempt, Vertex said.
While the report focuses on the U.S., Vertex noted that multinational companies face additional complexity abroad as countries expand value-added tax enforcement and adopt real-time e-invoicing requirements. The company said 2026 could be a pivotal year for global compliance as more jurisdictions require faster, more detailed reporting to close tax gaps.
Vertex said the findings underscore a rapidly evolving tax environment that will require greater visibility, automation, and agility from businesses operating across state and national borders.
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