Sales Tax Changes That Took Effect January 1, 2026

Whether you’re a founder, controller, or finance leader, we’ve all been burned by sales tax compliance before. We know the feeling, too: January rolls around, you’re planning your year, and then you remember: states probably changed their sales tax rules again.

You're not wrong. January 1, 2026 brought a wave of sales tax changes across multiple states, impacting everything from grocery taxation and vendor discounts to digital products. And if you're manually tracking all of this, that's a recipe for the exact kind of mess you've dealt with before.

Today, we’re breaking down the major changes so you know what should be on your radar. The good news is that this is exactly the kind of constantly-shifting compliance landscape that Kintsugi was built to handle automatically.

Here are the highlights of what changed, state by state.

Arkansas

What changed: At the state level, Arkansas fully repealed its state sales tax on food and food ingredients. Previously, groceries were taxed at a reduced 0.125% state rate.

What it means for you: You'll still collect local sales tax on groceries where applicable, but no more state-level tax. Your systems need to be able to distinguish between state and local tax collection on food items.

Illinois

Illinois decided to shake things up with three significant changes for 2026:

1. State Grocery Tax Eliminated

What changed: The 1% state grocery tax is gone. Food for human consumption is now exempt from state sales tax. Municipalities and counties can now impose their own local grocery tax up to 1% (but total local grocery tax can't exceed 1% in any jurisdiction).

What it means for you: Track which local jurisdictions adopt the new local grocery tax. Your tax logic needs to handle location-based grocery taxation.

2. Economic Nexus Gets Simpler

What changed: Illinois dropped the 200-transaction threshold for remote sellers. Now it's purely based on the $100,000 gross receipts threshold.

What it means for you: If you're a high-volume, low-value seller, you're less likely to trigger nexus based solely on transaction count. You only need to monitor the revenue threshold now.

3. New 15% Penalty for Missing Location Data

What changed: This is the big one. If you're making destination-based sales and fail to provide adequate location information (addresses, schedules, supporting documents), Illinois can now tax those receipts at a flat 15% rate. That’s higher than any actual combined sales tax rate in Illinois. This is a punitive measure designed to force better record-keeping.

What you need to do: Make sure you're maintaining detailed ship-to and destination records. Inadequate sourcing data is now extremely expensive.

Utah

What changed: Counties can now apply restaurant/prepared food taxes to "customized foods" sold by grocery stores, convenience stores, and gas stations—basically, food that's heated, prepared, or assembled to order for immediate consumption.

What it means for you: If you operate or sell to these types of locations, you need to distinguish between standard grocery items and prepared-to-order food. They're taxed differently and require separate reporting.

Maine

Two major shifts happened in Maine, making a new category of goods—digital products—taxable.

1. Digital products are now taxable: Digital audiovisual and audio works (Netflix, Disney+, Spotify, Audible, podcasts) are now subject to Maine's 5.5% sales tax.

2. Service Provider Tax repealed: The separate Service Provider Tax is gone, with its base largely rolled into regular sales tax.

What it means for you: If you provide streaming services or digital content, you now need Maine sales tax registration and must collect the standard rate. Update your classification systems to treat digital content as taxable.

Washington

What changed: Washington repealed its long-standing exemption for precious metal bullion. Gold, silver, platinum, and palladium sales are now fully taxable.

What it means for you: If you deal in precious metals, you're now collecting 6.5% state rate plus local sales tax (often 7-10%+ combined). Washington went from being bullion-friendly to taxing it like any other retail good.

Ohio:

What changed: Ohio eliminated several targeted exemptions, including:

• Machinery/equipment used in printing for sale
• Certain advertising materials and catalogs
• Telecom for qualified call centers
• Electronic publishing equipment …And more.

The silver lining: The vendor discount is now capped at $750 per month (previously 0.75% with no cap).

What it means for you: If you're in printing, direct marketing, call centers, or electronic publishing, purchases that were previously exempt are now fully taxable. High-volume filers will feel the impact of the vendor discount cap.

Nebraska

What changed: The timely-filing discount dropped from 3% of the first $5,000 (max $150/month) to 2.5% of total tax due, capped at $75 per month.

What it means for you: You're effectively remitting more tax to the state, even though you're doing the same compliance work.

Colorado

**What changed: Colorado eliminated its 4% state vendor fee that was capped at $1,000 per filing period.

What it means for you: If you were a smaller retailer benefiting from this fee, you just lost meaningful administrative reimbursement. You now remit 100% of collected tax.

Louisiana

What changed: Electronic filing and payment are now mandatory for all business taxes, including sales and use tax. Plus, there's a new combined state and parish return format.

What it means for you: If you were still filing paper returns, that option is gone. You'll need to transition to e-file/e-pay and adopt the new combined return format that consolidates what used to be multiple separate filings.

Keeping Up With Annual Changes

If you read through all of that and thought, How am I supposed to keep track of every single state changing rules every single year? You're asking the right question.

These are just the changes that took effect on January 1. States make changes throughout the year. Rates change. Nexus rules evolve. Product taxability shifts. And if you're managing this manually or with a patchwork of systems, you're always going to be one step behind.

That’s why we created Kintsugi.

We automatically track every sales tax change across all 50 states—rate changes, nexus updates, exemption modifications, filing requirement shifts—and apply them to your transactions in real time. You don't need to read state revenue department bulletins. You don't need to manually update tax matrices. You don't need to worry that you missed something.

When Arkansas exempts groceries or Illinois introduces a punitive 15% rate for missing location data, Kintsugi's already updated. When Maine starts taxing streaming services or Washington axes its bullion exemption, we've got it covered. Kintsugi seamlessly integrates with your stack, for streamlined tracking, even through all the changes.

Ready to stop manually tracking sales tax changes? See how Kintsugi automatically keeps you compliant as rules evolve. Let’s talk!