The state and local tax (SALT) deduction has always been a political flashpoint, but its impact goes far beyond politics. With Congress advancing an expanded SALT deduction in the new tax law, businesses need to pay attention, not just households. Why? SALT intersects with consumer behavior, state budgets, and ultimately, sales tax compliance.
What the Expanded SALT Deduction Means
Under the recently signed One Big Beautiful Bill Act, the SALT deduction cap will increase from $10,000 to $40,000 starting in 2025. The cap will then rise by 1% each year through 2029 before reverting to $10,000 in 2030. This offers short-term relief to taxpayers in high-tax states like New York, California, and New Jersey, but the sunset provision keeps uncertainty alive. For state governments, this reduces immediate pressure to cut local taxes. For businesses, especially those selling across multiple states, the bigger story is how these shifts influence consumer spending and sales tax obligations.
The Consumer Spending Ripple Effect
When households get relief from SALT caps, they gain more disposable income. That often translates into higher retail spending, both online and in-store. More spending means more sales tax revenue. For businesses, this creates opportunity, but also compliance risk. Transaction volume will rise, making it critical for businesses to ensure their sales tax engines are configured correctly for every jurisdiction where they operate.
State Budgets and Sales Tax Dependency
State governments rely heavily on sales tax revenue, especially those without a state income tax. Expanded SALT deductions could ease pressure on state legislatures to cut local tax rates, reinforcing sales tax as a primary revenue driver. Businesses should anticipate that sales tax audits will remain aggressive as states continue defending their tax bases.
Sales Tax Complexity: Why Businesses Should Care
SALT is often positioned as an income tax issue, but its downstream effects hit sales tax directly.
Here’s why:
- Higher consumer spending = higher transaction volume → scaling compliance systems becomes critical.
- State reliance on sales tax = stricter enforcement → states will continue to audit aggressively.
- Jurisdictional differences remain → expanded SALT won’t make compliance simpler. Each state still has unique taxability rules, exemptions, and filing deadlines.
For CFOs and tax leaders, this is another reminder that sales tax automation isn’t optional. Legacy systems weren’t built for today’s complexity. Modern platforms, like ours, adapt in real time, provide rooftop-level accuracy, and integrate directly with ERP and CPQ systems to reduce error risk.
The Big Picture: Policy Meets Technology
The SALT deduction debate may be about fairness in taxation, but for businesses, the bigger takeaway is readiness. Policy shifts, whether tariffs, SALT deductions, or new digital tax rules, change consumer behavior and state enforcement priorities overnight. Companies that treat sales tax as an afterthought get blindsided. Companies that treat it as critical infrastructure stay ahead.
The Bottom Line
SALT may make headlines in Washington, but its ripple effects land in every invoice, checkout cart, and tax return. For businesses, the question isn’t whether tax law will change; it’s how fast you can adapt when it does. You need a tax partner that gives you an advantage: clarity, control, and compliance at the speed of policy change.
Mike Sanders is a tax technology entrepreneur with over 30 years of experience building and scaling successful businesses. Currently, as CEO and co-founder of CereTax, he leads the company’s vision and strategy, ensuring the development and delivery of a next-generation cloud-based sales tax automation platform designed to help businesses navigate complex compliance and regulatory requirements with greater accuracy and efficiency.
Before co-founding CereTax in 1998, Sanders co-founded Tax Partners, growing it into the nation’s largest sales tax compliance service bureau before its acquisition by Thomson Corporation. In 2010, he co-founded SureTax, the first SaaS tax calculation platform tailored for the telecom and energy sectors, which was later acquired by Wolters Kluwer.
