Why Your Business Can’t Afford to Ignore Sales Tax Compliance in the Age of AI
In recent years, state and local governments have increasingly turned to advanced technologies, such as artificial intelligence (AI) and data analytics, to streamline audit processes and identify businesses that may be falling short of their sales tax obligations. What once required time-consuming manual reviews can now be done in a fraction of the time using powerful algorithms that flag inconsistencies, anomalies, and red flags across multiple data sources.
What Does This Mean for Your Business?
If you’ve been treating sales tax as an afterthought, it’s time to rethink that strategy. This new era of audit activity isn’t just targeting large corporations; small and mid-sized businesses are very much in the spotlight. AI-driven tools are enabling tax agencies to cast a wider net with greater precision, thereby increasing the likelihood that noncompliant businesses—whether intentionally or not—will be caught.
Here are three key takeaways for businesses navigating this environment:
- Compliance is no longer optional. The margin for error has narrowed. With automated tools on their side, states can more easily detect discrepancies between tax returns, exemption certificates, and sales data.
- Ignorance won’t protect you. Even if your business wasn’t aware of a sales tax obligation in a specific jurisdiction, you could still be held liable. Nexus rules continue to evolve, and staying informed is your responsibility.
- Proactivity pays off. Working with a tax advisor might seem like an added cost—but it’s far less expensive than dealing with an audit, penalties, and interest down the line.
The Bottom Line
AI isn’t just transforming private industry—it’s reshaping how tax enforcement works. Businesses that adopt proactive compliance strategies will not only mitigate their audit risk but also establish a stronger foundation for long-term growth.
About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.