For the past few years, sales tax has quietly become one of the most complex areas of compliance for businesses. Audits are increasing, getting more sophisticated, and in some cases… reaching further back than businesses expect.
What started with South Dakota v. Wayfair, Inc. in 2018 has officially entered its next phase: expansion and enforcement.
From “New Rules” to Real Consequences
Before Wayfair, most businesses only worried about sales tax in states where they had a physical footprint. Now, “economic nexus” rules mean you may have obligations in multiple states simply based on sales volume or transaction count.
Many states initially set thresholds like:
- $100,000 in annual sales into the state, or
- 200 transactions into the state
But these thresholds are still evolving – states are lowering thresholds, removing transaction counts, and continuously refining their standards. Thus, making compliance a moving target…
If that doesn’t concern you, sales tax audits have drastically increased over the last couple of years, and because of that “economic nexus”, South Carolina is not always the state you should be worried about. Even if you don’t have a physical presence in Georgia, Georgia can still audit you for the products you sold in Georgia.
The Rise of the Retroactive Audit
Here’s where things get more serious. States aren’t just looking at what you’re doing now—they’re looking at what you should have been doing. In a recent January 2026 ruling, Wisconsin held StubHub liable for $17 million in back taxes and penalties from sales they made in 2008 – 2013 from admissions to amusement, athletic, and other entertainment events.
StubHub argued that they were not the “seller” as defined by the tax code at the time – claiming they were a “passive facilitator” like an auctioneer of sorts. But the court used a 2019 marketplace provider law to hold them liable, as the law stated that anyone who facilitates the retail sale is a seller. Of course, StubHub shot back that the 2019 law was not in effect at the time, but the court ruled it was a clarification of what the state always intended. Just goes to show you how serious the states are getting with sales tax – Wisconsin was able to reach back nearly a decade to collect.
Fun fact, StubHub’s $17 million debt is slightly less than Wisconsin’s total statewide sales in 2008, and nearly half of its statewide sales in 2013.
Why States Are Pushing Harder
States are facing tighter budgets and are actively looking for revenue sources. Sales tax audits are one of the most effective tools to generate immediate cash.
StubHub’s new debt? It almost equates to Wisconsin’s total statewide sales in 2008 and nearly half of its statewide sales in 2013 – that’s a lot of extra funds heading to Wisconsin.
Not only that, but with economic nexus and the broadening of what’s taxable (i.e. not just retail anymore), the states can expand their pool of businesses to audit.
What Triggers an Audit Today
Audits aren’t just about obvious noncompliance anymore. Red flags now include:
- Crossing economic nexus thresholds without registering, or even registering late
- Significant business changes – sudden increases / decreases in revenue, major changes like restructuring or mergers
- High initial sales tax reporting
- Mismatches between reported sales and third-party data
Unfortunately, we don’t know exactly what states will look for, but we can try to minimize these risks by evaluating your current process, confirming taxability in each state, and keeping clean, detailed records.
The Bottom Line
We’ve seen the increase with our own eyes – at least five of our clients in the last two years have experienced a sales tax audit. Before then… I don’t even remember the last time a client was audited for sales tax.
The good news is that businesses that get ahead of this now will be in a far better position than those trying to unwind it later. Evaluate where you have nexus, your current reporting process, taxability of your products and services within each state, and keep detailed records.
You don’t have to have a perfect process in place, but you do need to be aware of the risks and be able to act before the Department of Revenue starts asking questions.
