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Sales tax advice for the second half of the year from former state auditors

by Sarah Craig June 30, 2026
Reviewed by Katherine Martinez , Senica Ambers

If you run an e-commerce business, the second half of the year is when sales volume peaks, and when sales tax compliance gets complicated. Prime Day, back-to-school, Black Friday, Cyber Monday, the December holiday rush. It’s the season you’ve been building toward.

But higher sales volume doesn’t just mean more revenue. It means more sales tax complexity like new states where you need to collect sales tax, more states to file in, sales tax holidays to navigate, and filing deadlines stacking up all at once. We recently hosted a webinar with two members of our tax team, Senica and Katherine, both former state tax administrators, to walk through exactly what sellers need to know heading into H2. Here’s what they covered. 

What is sales tax nexus and why should you keep an eye on it as you grow?

Sales tax compliance starts with one foundational question: where are you actually required to collect and remit sales tax?

The answer comes down to nexus, the legal connection between your business and a state that creates a tax obligation there. There are two types:

• Physical nexus is straightforward: if you have an office, employees, a warehouse, or inventory stored in a state, you have nexus in that state.
• Economic nexus is where things get complicated and where most growing e-commerce sellers get caught off guard. Since the Supreme Court’s landmark 2018 South Dakota v. Wayfair decision, states can require out-of-state sellers to collect sales tax based purely on sales volume, with no physical presence required. Today, 45 states have state economic nexus laws.

These thresholds vary by state. For example, California requires $500,000 in gross revenue before nexus kicks in. Connecticut requires both $100,000 in revenue and 200 or more separate transactions. Illinois requires either $100,000 or 200 transactions. Whether a state uses “and” or “or” changes everything about when your obligation begins.

The thresholds can also change, and states don’t always announce it with a lot of notice, something Katherine saw firsthand during her years at the Texas Comptroller’s office.

The problem with tracking sales tax in a spreadsheet

Many sellers start by tracking nexus exposure manually, logging revenue totals and transaction counts by state in a spreadsheet. It works when you’re selling in a handful of states at low volume. But the cracks show quickly as you scale.

A spreadsheet doesn’t send you an alert when you’re approaching a threshold. It doesn’t automatically pull in data from multiple sales channels. Senica notes from her time as a state auditor: by the time most businesses realize they’ve crossed a threshold, they’re already in an audit.

That window between crossing a threshold and getting registered matters. Once you hit nexus in a new state, the state expects you to start collecting. But you can’t legally collect without a permit, which means you need to register, receive your permit, and start collecting before that next sale. If you miss it, you’re on the hook for back taxes, penalties, and interest.

Sales tax holidays: Not as simple as they sound

Sales tax holidays might sound like a compliance break, but Katherine, drawing on her background in state tax administration, calls them one of the most operationally complex events of the retail year.

Here’s why:

• Every state runs its own holiday. The eligible product categories, the timing, even the name are all different.
• Most holidays have price thresholds. It’s not that all clothing is tax-free during a back-to-school holiday. It’s that clothing under a specific price point is tax-free. Anything at or above that threshold still gets taxed. Your system has to apply the exemption at the right price point, to the right products, and stop applying it the moment the holiday ends.
• Local jurisdictions can opt out. In some states, individual cities and counties decide whether they’re participating, sometimes at the last minute. Alabama, for example, allows local jurisdictions to opt out just days before a holiday begins.

If you’re selling back-to-school products, emergency preparedness supplies, or household appliances, this is something to plan for before the window opens, not after.

July filing: The month that sneaks up on e-commerce businesses

July is one of the busiest sales tax filing months of the year, and it catches sellers by surprise because it’s when monthly and quarterly due dates converge.

If you’re a multi-state seller, you might have a monthly filing due on the 20th in one state, a quarterly filing in another, and an annual return in a third. Scale that across six or eight states, each with its own form, its own portal, and its own due dates, and you’re looking at a serious time investment. And as Senica points out, the stakes are higher than usual: you’re filing on Q2 numbers, which for many sellers are the strongest of the first half of the year. Larger numbers mean errors are more expensive.

Filing manually means gathering your sales data by state, reconciling it, logging into each state’s portal, navigating their individual processes, over and over again. Every manual step is an opportunity for an error, and errors in sales tax filings come with financial consequences.

TaxJar’s AutoFile feature handles this end to end: preparing your returns based on your actual sales data and submitting them to each state automatically, on time, every time. In 2025, TaxJar filed 100% of customer returns on time.

A few things to do right now to prepare for July:

1. Make sure your reports from sales channels are syncing, if your data has a lag, your filings will reflect it.
2. Review your filing frequencies. If your sales increased significantly in the last six months, some states may have already changed your assigned frequency.
3. If you’re not on AutoFile yet, set it up to set yourself up for success in the coming months. 

What increased sales mean for your compliance obligations

More sales volume in H2 means three concrete compliance risks:

1. New nexus thresholds crossed. A strong Black Friday weekend could push you over a threshold in a state you weren’t monitoring.
2. Filing frequency upgrades. A significant uptick in Q3 revenue can cause a state to move you from quarterly to monthly filing, meaning more deadlines, often with little notice.
3. Higher tax liability exposure. The more you’re selling, the more compliance gaps cost you. If your processes don’t scale with your business, you’re building up audit exposure.

TaxJar is built to handle all of this in the background by providing:

• Real-time nexus monitoring with proactive threshold alerts
• Consolidated reporting across Shopify, Amazon, Walmart, eBay, Etsy, TikTok Shop, and more
• Rooftop-accurate tax rate calculations down to the actual delivery address
• Automated filing and remittance
• Registration support when you hit nexus in a new state

Can you just use AI for sales tax?

AI is genuinely powerful in this space. At TaxJar, we use AI to process large transaction volumes, monitor tax rate changes across thousands of jurisdictions, and automate workflows that would be impossible to run manually at scale. We track hundreds of thousands of rate and rule changes. AI is essential for doing that efficiently.

But AI is not a substitute for compliance expertise. Tax legislation is nuanced, and it can be difficult for a model to distinguish between a proposed ruling and one that’s in final regulation form. And as Katherine, who spent years running audits at the Texas Comptroller’s office, puts it plainly: “If an auditor asks you to justify a nexus determination, ‘the AI said so’ is not a defense.”

The right approach is a partnership: AI handles the volume and speed, human tax experts handle the precision. TaxJar’s team implements over 250 tax rule changes annually, reviewing AI outputs, catching edge cases, and making judgment calls on the complex situations that require real expertise.

When evaluating any compliance tech stack, the question isn’t “can AI do this?” It’s “does this solution have the right combination of automation and human oversight to actually keep me protected?”

Ready to stop managing sales tax manually?

Sales tax compliance is one of those things that feels manageable until it suddenly isn’t, and the second half of the year is when most sellers find that out the hard way.

If you’re approaching nexus thresholds in multiple states, selling across more than two or three channels, or heading into a high-volume season without automated compliance in place, now is the right time to make a change.

Start a free 30-day trial at taxjar.com, or schedule a demo to talk to someone on our team.

Questions from the audience

Webinar attendees submitted these questions during the live session. We’ve answered them here in case you have the same questions.

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