February 2026 monthly roundup

This month’s tax roundup highlights new tax rules, policy shifts, and other key tax and compliance updates that were covered in our blog in February 2026 and may affect your business.

State legislatures considered numerous sales tax changes in February 2026. Proposals include creating new sales tax holidays, decreasing sales tax rates, eliminating the transaction threshold for economic nexus, exempting newly taxable services, and implementing retail delivery fees. 

U.S. tariff policy remains volatile following the Supreme Court’s IEEPA ruling. The U.S. Supreme Court has ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to establish tariffs. As businesses worldwide wait to learn if, when, and how the U.S. will refund IEEPA tariffs, they must comply with new tariffs imposed under Section 122.

Agentic AI is emerging as a critical tool for managing audit risk and tax compliance complexity. As states expand tax bases and heighten enforcement, retailers, manufacturers, small businesses, and construction contractors may face higher compliance burdens. Agentic AI helps automate exemption certificate management, monitor transaction-level risk, integrate tax compliance into ERP systems like Microsoft Dynamics 365, and reduce audit exposure in an increasingly complex regulatory environment.

Washington state considers revising sales tax base … again. Washington started taxing numerous B2B services on October 1, 2025. Now, the Legislature is looking to exempt some of the newly taxable services. It could also temporarily waive penalties and interest for taxpayers who inadvertently failed to collect and remit sales tax on newly taxable services.

Sales tax rules related to shipping and delivery can be hard to unravel. To get sales tax right on online orders for delivery, you need to know how the ship-to state taxes shipping, handling, and delivery fees. Our state-by-state guide on how to handle sales tax on shipping unpacks their policies.

Alaska seriously considers state sales tax. Five states currently don’t have a general state sales tax: New Hampshire, Oregon, Montana, Alaska, and Delaware, the NOMAD states. We’ll have to come up with a new acronym if Alaska establishes a state sales tax, as Senate Bill 227 proposes. MOND? DOMN?

South Carolina considers new sales tax holidays. South Carolina has offered an annual tax-free weekend for years and may soon provide one or more additional sales tax holidays. The South Carolina Legislature could turn the existing tax-free weekend into a tax-free month, establish a new disaster-preparedness tax holiday, and/or create a sales tax holiday specifically for small businesses. 

Nevada moved sales tax filing deadlines earlier. Until recently, many Nevada taxpayers had until the last day of the month to file and pay Nevada sales and use tax. Effective January 2026, Nevada sales and use tax returns and payments are due by the 20th of the month following the reporting period.

Tennessee may lower food taxes. Groceries in Tennessee are subject to a reduced state sales tax plus applicable local sales taxes. The Tennessee Legislature is currently considering multiple bills that would reduce or eliminate state and/or local sales taxes on groceries. If any of the bills become law, Tennessee taxes on food for home consumption will change effective July 1, 2026. 

The coming year could see notable New Jersey sales tax changes. The Garden State may finally get rid of its transactions threshold for economic nexus, and it could lower its sales tax rate from 6.625% to 6%.

Vermont is considering a retail delivery fee. Vermont was one of about a dozen states to consider a retail delivery fee in 2025. New legislation introduced in February 2026 would impose a 30-cent fee on all retail deliveries by persons required to collect Vermont sales tax starting July 1, 2026.

The U.S. Supreme Court ruled against IEEPA tariffs. In 2025, President Donald J. Trump repeatedly invoked the International Emergency Economic Powers Act (IEEPA) to establish sweeping reciprocal tariffs. On February 20, 2026, the Supreme Court of the United States ruled that IEEPA does not authorize the president to impose tariffs. 

The Supreme Court decision is reshaping tariffs in 2026. In fact, though the world is still waiting to see if, when, and how the U.S. will refund duties collected under IEEPA, the president has gone ahead and imposed new tariffs under Section 122. 

The EU is ending its €150 customs duty exemption. In February 2026, the Council of the European Union approved new small-parcel duty rules. As an interim measure, a flat-rate customs duty of €3 per parcel will apply to low-value consignments entering the EU effective July 1, 2026.

Mandatory is not optional. U.S. sales tax requirements can be quite confusing for businesses used to dealing with European value-added tax (VAT). When compliance becomes mandatory, growing U.K. ecommerce businesses must learn to navigate and comply with sales tax rules.

Small businesses weigh reshoring manufacturing. The pandemic led to an increase in U.S. manufacturing, and ongoing tariff turmoil is causing some small businesses to rethink their manufacturing options. In this blog post, we explore some of the tax implications of reshoring manufacturing.

Pairing Artificial Intelligence with vetted tax content can help improve compliance related to exemption transactions. Businesses must manage exempt online sales, track when sales tax exemption certificates expire, and figure out what to do when a buyer claiming an exemption doesn’t have an exemption certificate. See how Avalara is applying the power of AI to transform and simplify exemption certificate management. 

Big compliance challenges for small businesses. Tax compliance could become more onerous for small businesses in 2026 as states expand their tax bases and seek new sources of revenue. Find out what every small business should know about sales tax in 2026.

Licensed to build. Construction contractors operating throughout the U.S. may contend with more than 70,000 different licensing authorities — and each new license or renewal can demand three or more hours of research, form filing, and follow-up. With noncompliance carrying serious financial, legal, and reputational risk, construction contractors should consider how centralized and standardized processes can support licensing compliance.

Manufacturers face a complex tax landscape and often have high audit exposure. This blog post breaks down why sales/use tax, property tax, and international taxes can be especially complicated for manufacturing operations and highlights how purpose-built agentic AI can help.  

Under (audit) pressure. States facing revenue challenges may rely on audits to fill their coffers more and more. Agentic AI can help retailers proactively identify anomalies, surface risk patterns, and continuously monitor transactions to reduce audit exposure before issues escalate. Instead of simply automating tasks, agentic AI flags inconsistencies, prioritizes high-risk areas, and helps tax teams focus on what actually needs attention. 

A Super Bowl replay with a twist. This playful property tax blog post pits the Seahawks and Patriots against each other in a different contest: franchise valuation. Discover what drives NFL team value and how factors beyond wins and losses shape the financial pecking order. 

Agentic AI for Microsoft Dynamics 360. Instead of relying on manual workarounds or disconnected tools, agentic AI executes complex compliance tasks within Microsoft Dynamics 365 while keeping humans in control. The solution integrates seamlessly into existing workflows and helps teams cut risk and administrative drag in an increasingly complex tax environment.

More options for Avi for Chrome. Free and easy to install, the Avalara Avi Chrome extension delivers guided setup, real-time guidance, and contextual help for QuickBooks Online, Microsoft Dynamics 365 Business Central, and Shopify users. Avi for Chrome helps streamline onboarding and makes ongoing compliance less painful by answering questions, flagging errors, and explaining key concepts right where you work. 

What tax changes took effect in February 2026?

In February 2026, lawmakers advanced proposals that could affect sales tax holidays, grocery sales tax, B2B service taxation, retail delivery fees, and economic nexus rules. The U.S. Supreme Court also ruled that IEEPA does not authorize the president to impose tariffs, reshaping the legal landscape for U.S. trade policy. At the same time, President Trump established new tariffs under Section 122.

Were there any new sales tax rate changes in February 2026?

No major statewide rate reductions took effect in February 2026, but rate changes are under consideration. For example, New Jersey could lower its statewide sales tax rate from 6.625% to 6%, and Tennessee may reduce its grocery sales tax. Businesses should monitor pending legislation, as rate changes could take effect later in 2026.

Did any states update their economic nexus thresholds in February 2026?

No economic nexus threshold eliminations took effect in February 2026, but New Jersey is considering removing its transactions threshold requirement. If enacted, remote sellers would need to register based solely on meeting the state’s sales revenue threshold, expanding compliance obligations for some multistate sellers.

Are there new compliance deadlines businesses should know about?

Yes. Nevada sales and use tax returns are due by the 20th of the month following the reporting period, as of January 2026. Nationwide, businesses should watch for potential changes tied to proposed retail delivery fees, sales tax holidays, and exemptions that could affect filing and reporting requirements later in the year.

How do these February 2026 updates affect multistate sellers?

Multistate sellers must monitor and comply with changing sales tax laws in all states where they have sales tax nexus. Proposed changes to nexus rules, rates, retail delivery fees, and taxability rules all raise compliance risk, as do shifting tariff rules.