Audit pressure continues to rise as retail operations expand and regulatory requirements tighten. U.S. states are broadening their sales tax bases and introducing new obligations, fees, and reporting mandates, while retailers operate across more channels and business models than ever before.
Together, this regulatory and operational complexity raises the risk of inconsistencies surfacing during audits.
Complicated indirect tax environments
Retailers are required to calculate tax across up to 12,000+ U.S. sales and use tax jurisdictions, each with its own rates, rules, exemptions, and local tax laws. As rules update frequently, maintaining consistent tax treatment across products and locations becomes harder. Small inconsistencies can quickly turn into audit exposure when applied across high transaction volumes.
Exemption certificate management gaps
Exempt sales remain one of the trickiest areas of tax compliance management. Yet, according to 2023 survey results, 54% of U.S. businesses manage sales tax exemption certificates manually. Manual tracking increases the risk of missing, expired, or invalid certificates and makes it harder to retrieve documentation when auditors request it.
Use tax accrual challenges
Use tax exposure often occurs when purchases such as supplies or services are not taxed at the time of sale and must be self-assessed. When these transactions fall outside standard procurement processes, retailers may under-accrue use tax. Auditors routinely review these areas, particularly when accrual practices vary across locations or vendors.
High transaction volumes and high return rates
Large volumes of transactions, often combined with high return rates, create additional reconciliation challenges. Returns, credits, post-filing adjustments, and peak periods such as sales tax holidays add complexity, particularly when activity occurs after returns have already been filed. Without proper handling, these adjustments can contribute to the risk of overpayments or assessments.
Omnichannel sales complexity
Selling across ecommerce, POS, marketplaces, and dropshipping models introduces uncertainty around tax responsibility. Marketplace facilitator rules vary by jurisdiction, and dropshipping transactions often involve multiple parties. Inconsistent treatment across channels can lead to undercollection, overcollection, or duplicate taxation, all of which draw auditor attention.
Retail delivery fees and local surcharges
States and local jurisdictions are introducing retail delivery fees based on location, delivery method, or transaction value. These charges add another layer of calculation and reporting requirements. Missing or misapplying delivery fees is becoming a common source of noncompliance, particularly for high-volume retailers.
Cross-border complexity
International sales introduce additional risk through HS code classification, duties, and VAT or GST treatment. Classification errors can lead to penalties and audits. From a customer perspective, unexpected duties or taxes charged at delivery often result in cart abandonment, refused shipments, and a poor overall experience that compounds both compliance and lost revenue.
E-invoicing and digital reporting mandates
Governments are intensifying digital enforcement worldwide. More than 60 countries have announced, or already require, e-invoicing, with additional mandates emerging. These regimes give tax authorities greater visibility into transaction data and leave little room for inaccurate reporting.
As audits increasingly emphasize real-time data access, consistency, and control, retailers need compliance systems that can scale and adapt without adding manual effort.
