May 2026 tax compliance monthly roundup and updates

This month’s tax roundup highlights new tax rules, policy shifts, and other key tax and compliance updates covered in our blog in May 2026. Each could affect your business.

Key takeaways

Sales tax rules continue to evolve. State updates to exemptions, inventory nexus, service taxability, and sales tax holidays may impact compliance obligations.
Tariff and cross-border compliance remain in flux. Ongoing developments involving IEEPA tariff refunds, Section 122 tariffs, and global trade requirements could affect import costs and compliance strategies.
Tax automation and AI are reshaping compliance. New Avalara product enhancements, AI-powered capabilities, agentic compliance tools, and tax content solutions can help businesses reduce manual work and stay current with changing tax requirements.

State sales tax updates

Inventory nexus. Having inventory in a state, even inventory managed by a marketplace facilitator, can create unexpected sales tax liabilities for businesses. Learn where businesses face the greatest risk.

School supply exemptions. Starting July 1, 2026, Connecticut will exempt nonelectronic school supplies from sales and use tax.

Menstrual product taxes. Nearly 20 states still tax menstrual periods, but at least a dozen states, including North Carolina, have introduced legislation in 2026 to exempt tampons and similar products.

Sales tax holidays. Connecticut is increasing price thresholds and expanding eligibility to new products. Ohio has announced the dates and price caps for its 2026 tax-free weekend. Get the latest updates in our revised 2026 sales tax holidays guide.

Service taxability. Determining when services are taxable remains challenging. Review our updated guide to sales tax on services to better understand your current obligations.

Swipe fee legislation. Following the lead of Illinois, a growing number of states have introduced bills to prohibit swipe fees on taxes and tips. Meanwhile, Alabama is excluding merchant credit card transaction fees from the sales tax base.

Tariffs and cross-border compliance

IEEPA and Section 122 tariff updates. U.S. Customs and Border Protection continues to process IEEPA tariff refund claims, while the federal government works to defend Section 122 tariffs. Explore the latest tariff developments and review key tariff types affecting businesses in 2026.

Industry updates

Heavy equipment tax compliance. Heavy equipment dealers face unique tax challenges, including rental tax rules, mixed asset sales, exemption‑heavy customer bases, and multistate expansion. Learn how tax automation can help streamline compliance and support growth.

Tax planning strategies. Proactive tax planning can help businesses anticipate obligations, improve cash flow management, and make more informed financial decisions. Discover practical strategies to support long-term business growth.

Avalara products and AI updates

Product enhancements. Check out the first edition of Avalara Product Pulse, a new blog series designed to keep customers informed about platform enhancements, featured releases, and product updates. We’ve also updated our Avi for Chrome extension blog.

AI-powered compliance. Avalara continues to expand AI-powered capabilities that help automate manual tax and compliance work, including product classification, tax determination, exemption certificate validation, reporting insights, onboarding, and data mapping.

Agentic compliance. Avalara MCP servers enable AI agents to interact with tax and compliance systems through a standardized protocol rather than custom integrations. Our developer’s primer explores how agentic tax and compliance can support developers, AI builders, and Avalara partners.

Canadian sales tax automation. The Avalara QuickBooks Online connector now supports automated sales tax calculation for Canada, providing visibility into Goods and Services Tax (GST), Provincial Sales Tax (PST), Harmonized Sales Tax (HST), and Quebec Sales Tax (QST) while simplifying tax determination.

Tax rate management. Avalara Tax Content Essentials helps businesses stay current with changing tax rates without manually maintaining tax tables. The solution delivers thoroughly researched, regularly updated tax rates in ready-to-use files organized by business location, postal code, or both.

Tax liability financing. Avalara Capital provides compliance-ready financing designed to help businesses manage tax obligations and cash flow needs. Explore these related resources:

FAQ

Businesses should monitor inventory nexus rules, sales tax holidays, service taxability updates, new product exemptions, and state legislation affecting payment processing fees and tax collection requirements.

Recent developments involving IEEPA tariffs, Section 122 tariffs, and customs refund claims may affect import costs, tax calculations, and cross-border compliance obligations for businesses engaged in international trade.

Tax automation solutions, AI-powered compliance tools, regularly updated tax content, and proactive tax planning strategies can help businesses adapt to changing regulations while reducing manual compliance work.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.