Seven years after South Dakota v. Wayfair, many businesses are experiencing the “seven-year itch” of sales tax compliance. What initially appeared to be a manageable expansion of filing obligations has evolved into something far more operationally complex. The early years following Wayfair were focused primarily on reacting by registering in new states, implementing tax engines, filing additional returns and attempting to keep pace with rapidly changing nexus laws.
As the dust has settled, companies are realizing the real challenge was never simply adding more returns. The challenge was managing the growing ecosystem surrounding sales tax compliance.
Wayfair fundamentally changed the relationship between businesses and state tax authorities. Economic nexus standards dramatically expanded the number of companies required to collect and remit sales tax across multiple jurisdictions, particularly as e-commerce accelerated and states continued to expand the tax base with digital products, software-as-a-service (SaaS), and cloud-based services.
How the Wayfair Decision Went From Compliance to Complexity
Historically, sales tax departments focused on outputs:
- Filing returns on time
- Remitting payments
- Managing audits
- Responding to notices
The function was often siloed within tax or finance and relied heavily on spreadsheets, manual processes, and institutional knowledge.
That model became increasingly strained following Wayfair. Seven years later, many organizations are confronting the operational reality created by that shift. Economic nexus laws significantly expanded state authority to require remote sellers to collect and remit tax. Companies that once filed in only a few jurisdictions suddenly faced obligations in dozens of states.
Companies now sell across multiple channels, maintain evolving product offerings, utilize marketplaces, implement new billing systems and manage distributed workforces. Today, sales tax impacts nearly every area of the business, including:
- Finance
- IT
- Legal
- Procurement
- Sales and marketing
- E-commerce
- Customer service and onboarding
- Payroll and human resources (HR)
What was previously a “filing exercise” has become an operational ecosystem.
The Rise of Sales Tax Governance
As complexity increased, companies have started to realize that reactive compliance alone is no longer sustainable. Filing accurate returns is still important, but returns themselves are now only the visible outcome of hundreds of upstream decisions occurring across the organization. This realization has led to the rise of sales tax governance.
Sales tax governance focuses on proactively managing the systems, processes, data and people that influence tax compliance. Instead of asking only whether returns were filed correctly, governance asks broader questions:
- Are nexus obligations being monitored continuously?
- Are product taxability decisions documented and maintained?
- Are exemption certificates managed properly?
- Are operational changes communicated across departments?
- Is tax technology aligned with the company’s evolving business model?
- Are controls in place to identify issues before they become audit problems?
Governance shifts the focus from reacting to problems toward creating organizational control.
Sales Tax as an Enterprise Risk Function
One of the most significant changes is that sales tax is increasingly viewed as an enterprise risk management issue rather than a back-office administrative task. State departments of revenue have become far more sophisticated in identifying noncompliance. States now leverage:
- Data analytics
- Marketplace reporting
- Payroll information
- Cross-agency data sharing
- Third-party reporting tools
Public AI exposure related to sales tax issues has also increased. Companies facing sales tax problems may encounter:
- Significant audit assessments
- Penalties and interest
- Customer disputes
- Class action lawsuits
- Reputational damage
- Merger and acquisition (M&A) complications
In many cases, the largest risks no longer stem from late-filed returns. Instead, they arise from operational breakdowns such as incorrect ERP configurations, poor taxability mappings, unmonitored nexus exposure or inadequate communication between departments.
The Importance of People, Process and Technology
Modern sales tax governance depends on alignment between people, processes and technology. Technology alone cannot solve governance challenges. Backed by evidence from our mid-market CFO survey, many companies have and are investing heavily in tax engines and automation tools, yet still experience compliance failures because surrounding processes are weak or data inputs are inaccurate.
Effective sales tax governance requires the following practices that intertwine people, process and technology:
- Clearly defined ownership
- Documented procedures
- Cross-functional communication
- Monitoring controls
- Escalation processes
- Ongoing training
- Accurate and integrated data
People across the organization must understand how their decisions impact sales tax outcomes. For instance:
- Product setup teams influence taxability
- HR decisions may create nexus
- Procurement impacts use tax obligations
- Sales and billing teams affect invoicing accuracy and exemption handling
Governance recognizes that sales tax compliance is ultimately the result of how effectively the organization operates as a whole.
The Future of Sales Tax Management
Sales tax has become deeply integrated into the operational fabric of modern business. The focus is no longer on how quickly more returns can be filed, but how effectively organizations can manage the inputs that drive those filings by building a sustainable governance structure capable of adapting to constant change. Organizations that continue treating it solely as a compliance task may struggle to keep pace with evolving regulations, expanding enforcement and growing operational complexity.
The companies that succeed will be those that move beyond reactive compliance and embrace sales tax governance as an ongoing, operationally aligned business discipline.
Your Guide Forward
As nexus obligations, technology and business operations become more interconnected, organizations need a clear approach to managing risk and maintaining compliance. Cherry Bekaert’s Sales & Use Tax team helps businesses assess nexus exposure, evaluate taxability decisions, strengthen processes and address challenges before they become larger issues.
