Blog · 15 October 2026

Sales Tax and Use Tax Update: D.C.’s 7% Delay, Illinois Remote-Seller Amnesty and Wayfair Nexus — What US CPA Firms Should Tell Clients

By Keshav Bansal, CA

Sales tax and use tax changes kept moving on October 1, 2026. Avalara’s “October 2026 tax updates” (Gail Cole, October 1, 2026) flagged three items for US CPA firms with e-commerce and multistate clients: a Washington, D.C. rate increase, the Illinois Remote Retailer Tax Amnesty, and Pennsylvania local destination sourcing. One did not happen as published—a useful economic nexus lesson in itself.

Sales tax vs use tax in one minute

There is no federal sales tax; states and localities impose sales and use taxes. The seller generally collects sales tax and remits it; when the seller does not collect, the buyer usually owes use tax at the same rate. The Supreme Court described that structure in South Dakota v. Wayfair, Inc., and the Pennsylvania Department of Revenue repeats it in its current local sales tax guidance: if sales tax is not collected at purchase, the purchaser still owes use tax.

According to the Tax Foundation’s 2026 rate tables, five states have no statewide sales tax—Alaska, Delaware, Montana, New Hampshire and Oregon—and only Alaska allows local sales taxes. An Oregon-based seller can still owe collection duties where it ships.

Wayfair and economic nexus

Wayfair (No. 17-494, decided June 21, 2018) overruled Quill Corp. v. North Dakota and National Bellas Hess, holding the physical-presence rule “unsound and incorrect.” The South Dakota law upheld in that case reached sellers that, annually, delivered more than $100,000 of goods or services into the state or made 200 or more separate transactions there. Each state now sets its own economic nexus test, and thresholds change. The Illinois Department of Revenue (IDOR) says that for quarters starting on or after January 1, 2026, the remote-retailer test is $100,000 of Illinois gross receipts in the four preceding quarters; the 200-transaction test applied only to earlier quarters.

Washington, D.C.: the 7% rate that was postponed

Avalara’s October 1 post said D.C.’s general sales and use tax rate “will jump from 6% to 7% effective October 1, 2026.” The D.C. Office of Tax and Revenue (OTR) now posts a different notice: “The increase in the general sales tax rate to 7% has been postponed. The general sales tax rate remains 6% through September 30, 2027.”

• What changed: Thomson Reuters Checkpoint (October 13, 2026) reports the Fiscal Year 2027 Budget Support Act of 2026 (Act 26-418, Law 26-189) delays 7% to October 1, 2027; EY (September 15, 2026) reported the same delay in emergency bill B26-0724.
• What did take effect October 1, 2026: per EY and Checkpoint, the D.C. tax on rental vehicles and utility trailers rose to 11% from 9.25%, and the additional 1% lodging tax was made permanent.
• History: this is the second delay; OTR’s October 1, 2025 notice had held the rate at 6.0% through September 30, 2026.

The practical risk is over-collection: a client whose cart, POS or tax engine switched D.C. to 7% on October 1 may be overcharging customers. Confirm the rate in every client system. If too much was collected, ask how D.C. treats tax collected in error before deciding whether to refund customers or remit the excess.

Illinois Remote Retailer Tax Amnesty: closes October 31, 2026

IDOR Informational Bulletin FY 2026-28 (35 ILCS 120/2-13, added by P.A. 104-0006) sets out the program:

• Window: applications August 1 through October 31, 2026, filed electronically through MyTax Illinois only. Liabilities reported on paper returns do not qualify.
• Who: remote retailers of tangible personal property with no Illinois physical presence, unpaid sales tax on sales from January 1, 2021 through June 30, 2026, and the remittance threshold met for the periods claimed.
• Simplified rates: 9% for general merchandise and 1.75% for items normally taxed at the 1% state rate (food for off-site consumption, medicines, drugs, medical appliances). Without records supporting the 1.75% rate, sales are presumed taxable at 9%. If the seller collected more than the simplified rate, it must remit the larger amount.
• Relief: penalties and interest are waived if eligible liabilities are paid in full during the program or through a completed repayment plan. Hardship plans (6–24 months, with a down payment) must be requested by October 31; interest accrues from November 1, 2026.
• Prerequisites: IDOR registration (typically one to two business days) and an active MyTax Illinois logon.
• If a client skips it: IDOR warns of audits, and sales to undetermined locations can be assessed at 15%, including pre-2026 periods.

Books-and-records penalties, lien fees and certain audit penalties are not waived; clients under audit should coordinate with their IDOR auditor.

Pennsylvania: destination sourcing for Philadelphia and Allegheny

The Pennsylvania Department of Revenue says Act 21 of 2026 (enacted July 12, 2026; retroactive to tax years after December 31, 2025) moves local sales tax from origin (vendor location) to destination (delivery location). Vendors already collecting the 6% state tax must collect Philadelphia’s 2% and Allegheny County’s 1% local tax on taxable sales to customers there. The department began enforcing the rules on October 1, 2026. State sales tax and use tax rules are unchanged.

Sales tax on the federal return: the SALT election

Individual clients who itemize can elect to deduct state and local general sales taxes instead of state and local income taxes. IRS Topic 503 (updated September 24, 2026) says the election is made by checking box 5a on Schedule A, using actual receipts or the optional sales tax tables (or the IRS Sales Tax Deduction Calculator). The combined SALT deduction is still capped; Topic 503 states the limit as $40,000 ($20,000 married filing separately), subject to a modified AGI limitation but not reduced below $10,000. Clients in no-income-tax states and big-ticket buyers are the usual candidates; pair this with state planning such as the 2027 state millionaire taxes.

A short firm checklist

1. Pull D.C. sales for October 2026 and confirm 6% (not 7%) in every client cart, POS and tax engine.
2. Review Illinois sales from January 2021 through June 2026 for unregistered remote sellers; register now if amnesty makes sense before October 31.
3. Test Philadelphia and Allegheny delivery addresses for the 8% and 7% combined rates.
4. Refresh each client’s economic nexus map against current state thresholds, not 2018 defaults—like the $2,000 Form 1099-NEC threshold, old numbers go stale.
5. Flag unpaid use tax on out-of-state purchases and model the sales-tax-vs-income-tax election for itemizers. Fold the follow-ups into post-October 15 extension cleanup.

Where this fits for Tax Brew readers

Sales tax and use tax are mostly a data problem: addresses, invoice-level rates, exemption records and reconciliations. If nexus studies, amnesty workpapers or monthly sales tax reconciliations are stretching your team, outsourced bookkeeping and tax support for US CPA firms can prepare the schedules while your professionals keep the judgment calls. Email info@taxbrewglobal.com.

Sources: Avalara (October 1, 2026); D.C. OTR sales tax notice and October 1, 2025 notice; Thomson Reuters Checkpoint (October 13, 2026); EY Tax News (September 15, 2026); IDOR Bulletin FY 2026-28; Pennsylvania Department of Revenue (Act 21 of 2026); South Dakota v. Wayfair (June 21, 2018); Tax Foundation 2026 rates; IRS Topic 503 (September 24, 2026). General information, not tax or legal advice. Sources as of 15 October 2026.