KING OF PRUSSIA, PA — U.S. businesses are facing mounting tax compliance challenges as local jurisdictions ramp up changes to sales tax rates and rules, according to the newly released 2025 Mid-Year U.S. Rates and Rules Report from Vertex Inc. (NASDAQ: VERX).
The report reveals a significant uptick in tax activity, with 408 new or adjusted sales tax rates issued in the first half of 2025—marking a 24% increase over the same period last year. Local governments, rather than states, drove most of the action, as they look for ways to shore up public finances amid economic headwinds and expiring federal funding.
“This year’s surge in new taxing jurisdictions and the accelerated pace of local-level changes… has expanded the patchwork of tax rules businesses must navigate,” said Michael Bernard, Vertex Vice President and Chief Tax Officer. He emphasized that the rapid policy shifts are adding layers of complexity, particularly for companies operating across multiple states and municipalities.
Local Changes Outpace State Action
While only one state—Louisiana—raised its sales tax rate so far this year, the volume of local-level adjustments surged. Louisiana’s increase from 4.55% to 5% on January 1 represented the first state-level sales tax hike since 2020, and just the fourth in five years.
At the county level, rate changes jumped by 42% compared to the same period in 2024. District-level changes also climbed 23%. The number of cities implementing new taxes doubled from 30 to 60, while new taxing districts rose sharply from 77 to 140—an 82% increase.
City-level tax hikes vastly outpaced cuts, with nearly six increases for every one decrease. Though the total number of city rate changes dropped from 159 in 2024 to 117 in 2025, the majority involved rate hikes.
Economic and Policy Shifts Fuel Uncertainty
The report identifies several forces driving the shift, including softening state revenues, ongoing inflationary pressure, and geopolitical disruptions. Adding to the volatility is uncertainty around the Federal Tax Act passed earlier this month and potential changes to federal matching funds and tariffs.
With budget gaps widening and fewer funding options available, many localities appear to be leaning more heavily on sales tax adjustments to preserve services such as infrastructure maintenance and emergency response.
Key Trends to Watch
Digital Taxation Gains Momentum
States are expanding the sales tax base to include digital goods and services. Maryland recently imposed a 3% tax on data and IT services, joining states like Texas that have already amended digital tax frameworks. The Multistate Tax Commission is exploring standardized approaches, raising the possibility of broader adoption—or even federal intervention—by 2026.
Global E-Invoicing Demands Grow
While the U.S. shows no immediate sign of adopting mandatory e-invoicing, international jurisdictions are quickly moving in that direction. U.S.-based multinationals face increasing obligations abroad, requiring robust data governance and compliance systems to meet real-time reporting standards.
Compliance in a Shifting Landscape
The mid-year findings reinforce that businesses must be nimble in their compliance efforts. With more than 11,000 sales tax jurisdictions in the U.S., changes—even in a fraction of them—can significantly impact tax obligations and reporting.
As Bernard noted, the evolving tax environment “demands greater agility and precision” from companies, particularly as local governments adjust policy to stabilize their finances in an increasingly uncertain economic climate.
The full report offers a sobering look at how fiscal stress at the local level is reshaping the tax compliance burden across the country—and why businesses can expect more of the same in the months ahead.
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