Why Sales Tax Advisory Services Are Breaking

If your firm delivers sales and use tax advisory, something has come loose in the work, and you already feel it. Demand for sales tax advisory services has never been higher, the rules have never moved faster, and the bench of practitioners who can actually do the work has never been thinner. Those three lines used to move independently. Now they converge on the same practice at once, and the old delivery model, one workbook per engagement, one expert per hard call, is bending under the weight.

This is the first post in a series on what that convergence means and what to do about it. Start here: you cannot fix a problem you have not named precisely.

What changed: the obligation followed the sale

In 2018, the Supreme Court decided South Dakota v. Wayfair and threw out the physical-presence rule that had governed sales tax for half a century. Before Wayfair, you owed sales tax in a state if you had a store, a warehouse, or a salesperson there. After Wayfair, you can owe tax in a state you have never set foot in. The obligation follows the sale, not the storefront.

Almost every state responded with economic nexus laws, and the effect rippled far past sales tax into income, franchise, and gross-receipts obligations, and into the diligence on every acquisition. As The Tax Adviser noted five years on, the decision reshaped multistate tax planning for businesses of every size. Thousands of companies woke up with exposure they did not know they had. Every one is a potential economic nexus study, and if your firm is known for this work, they are calling you.

Consider what that means in practice. A software company sells subscriptions from one state to customers in forty others. It never ships a product, never opens an office, never hires a salesperson outside its home base. Under the old rule it owed sales tax almost nowhere. Under economic nexus it may owe tax, penalties, and interest in a dozen states before anyone there has heard the word nexus. The exposure accrues silently until a funding round, an acquisition, or an audit forces it into the open, by which point it can be large enough to threaten the deal.

How complex is sales tax, really?

Sales tax is often described with one scary number, and it is real: Vertex counts more than 12,000 U.S. sales-and-use-tax jurisdictions, with roughly 600 new or changed rates a year. But the count alone tells the wrong story, and it is worth being honest about why.

A rate boundary is not a rulebook. Most local jurisdictions ride on their state's rules, so the bulk of any analysis resolves at the state level. The genuine difficulty lives in three places. First, home-rule states like Colorado, Louisiana, Alaska, Illinois, and Alabama, where local authorities write and administer their own rules. Second, the pace: rates, thresholds, and rules do not sit still, so a determination that was right last year can be wrong this year. Third, taxability drift, as states pull SaaS, digital goods, and streaming into the base one session at a time. Add Canada's federal and provincial regimes and a single mid-market client can face very different obligations across dozens of jurisdictions.

And the pace is accelerating. Vertex's mid-year 2025 data recorded 408 sales tax rate changes through June alone, a sharp jump over the prior year. Home rule compounds it. In Colorado, a single sale can touch state, county, city, and special-district rules that disagree with one another, and the local authority, not the state, decides what is taxable. Get a Colorado determination right in one city and you cannot assume it holds two counties over. Multiply that by a client in thirty states and the analysis stops being lookup and starts being judgment.

The problem was never the arithmetic. It is the judgment about which rule applies to this taxpayer, in this state, this year.

Demand is climbing, and clients are asking by name

Indirect tax advisory has crossed a line from niche specialty to a service clients request by name. As commerce moves online and across borders, more businesses trip nexus, and more of them treat sales tax as a board-level risk rather than a back-office chore. For a firm with a real advisory practice, that is not an abstract market. It is inbound demand.

The market data tracks the shift. Allied Market Research projects the tax advisory services market to grow from roughly $34.6 billion in 2021 to about $97 billion by 2031, with indirect tax advisory the fastest-growing slice. Treat the figure as a projection, not gospel. The direction is what matters, and it is unambiguous: the advisory work is compounding.

The bench is thinning at the same time

Here is the collision: the supply of people who can do this work is shrinking while demand climbs.

The Bureau of Labor Statistics projects about 115,300 openings a year for accountants and auditors from 2025 to 2035, driven largely by replacement needs as the profession ages out. The pipeline is not keeping up. Accounting degrees fell 6.6% to 55,152 in 2023 to 2024, per the AICPA, and new CPA Exam candidates dropped from 42,626 in 2023 to 28,082 in 2024.

There are early signs of recovery in enrollment, so this is a structural squeeze, not a cliff. But structural is the operative word. You cannot out-hire a demographic trend, and the people retiring are the ones carrying decades of multi-state judgment.

The AICPA-convened National Pipeline Advisory Group ties the squeeze directly to retirements, and they hit this specialty harder than most. Multi-state indirect tax judgment is not something you hire off the street or train in a single season. It is built over years of engagements, and it leaves the day the person who built it does.

Demand up. Complexity up. Rules in constant motion. Experienced people walking out the door. The expertise your firm still holds has never been more valuable, or more at risk of being lost.

The real problem sits underneath all of it

Strip away the jurisdiction counts and the pipeline charts and you reach the thing that actually breaks a practice: expertise is your firm's most valuable asset and its most fragile one.

A senior practitioner works out whether a bundled software charge is taxable in Texas, whether a client tripped nexus in Colorado in Q3, whether the facts justify a voluntary disclosure. That reasoning is worth more than any rate table, and in most firms it is captured exactly nowhere. It lives in a closed workbook, an email thread, one person's head, and the day that person retires it walks out with them. Finance and accounting are, in one industry analysis, epicenters of tribal knowledge, where critical process knowledge exists solely inside a single person.

Every departure is a knowledge-loss event. Every new engagement starts cold, re-deriving conclusions your firm has, in a real sense, already reached. That is the true cost of the talent squeeze, and why hiring alone was never going to solve it.

Picture the mechanics of it in your own practice. A partner who has spent twenty years learning which states will fight a bundling position and which will fold, which sampling methods a particular auditor accepts, and how a state treats software delivered by download versus software accessed in the cloud, announces her retirement. Your firm can hire her replacement. It cannot hire her twenty years. That pattern recognition was never written down in a form anyone else can use, so it leaves with her, and the practice quietly resets to a lower level of capability it does not even see on its balance sheet.

So what actually fixes it?

Not more hours, and not a bigger bench you cannot staff. The fix is to stop letting hard-won judgment evaporate and start capturing it so it compounds. Technology has automated the mechanical parts of tax for forty years. What is new is the ability to capture and reuse the reasoning behind the work, so your firm's expertise appreciates instead of resetting to zero every engagement.

Each earlier wave moved the profession up the value chain. The spreadsheet retired the paper ledger, tax software absorbed the return, the cloud made multi-state compliance practical at scale. Every time, the mechanical work was automated and human expertise migrated to where it was worth the most. This wave can do something the earlier ones could not: hold onto the expertise itself.

That is the thread we pull through the rest of this series. The next post takes on the most limiting assumption in the market: that the point of AI in tax is to save time.

Want to see what compounding your firm's expertise looks like in practice? L3i is the purpose-built AI platform for U.S. and Canada indirect tax advisory, built by Exactera. Schedule a demo at l3i.ai.