July 1 is the most important date on the sales tax calendar.
Twice a year — January 1 and July 1 — state and local governments synchronize their tax changes. Rates go up. Rates go down. New exemptions kick in. Old ones expire. Entire new tax categories launch.
This July 1 is busier than most.
Most state tax changes take effect either January 1 or July 1 — the start of the fiscal year for most states — and this cycle brings confirmed changes in Alabama, Illinois, Texas, Arkansas, North Carolina, Oklahoma, Vermont, Washington, and Utah. TaxHero
If you sell into any of these states, here's what's changing — and exactly what you need to do before the first transaction of July 1.
This one catches businesses off guard every time.
Alabama's Governor Kay Ivey signed Act 2026-604 into law in April, suspending the state's 2% sales tax on SNAP-eligible food items for two months starting May 1. That grocery tax holiday ends at midnight on June 30. Effective July 1, the 2% state rate on qualifying food resumes. Savant Labs
If you're a grocery retailer or food seller in Alabama, your systems were updated on May 1 to stop collecting the 2% state rate. On July 1, you need to reverse that change and start collecting again.
Alabama remains one of approximately nine states that still levies a state-level sales tax on groceries. The holiday was temporary. The tax is back.
Action required: Revert your POS and tax calculation systems to collect Alabama's 2% state grocery tax effective July 1. Don't forget that local grocery taxes remained in effect throughout the suspension — so only the state layer is changing.
We covered this in depth two weeks ago, but it bears repeating because the scope is significant.
A broad wave of local sales tax rate changes is hitting dozens of Illinois municipalities, business districts, and transit districts on July 1. The Illinois Department of Revenue has published its official bulletin identifying every affected jurisdiction.
Illinois's IDOR is direct about what businesses must do: adjust your cash register and any computer program so that beginning on July 1, 2026, you will collect and pay the correct sales tax. Contact your software vendor if you use software to create your forms. SmartAsset
The affected jurisdictions include cities across the state — from Addison to Wyanet — plus new business districts, county rate changes, and transit district updates. The full list includes McLean and Whiteside counties, plus new business districts in Bartonville, Breese, East Dundee, Montrose, and Rock Island.
For ecommerce sellers, the obligation goes deeper than just updating a statewide rate. Business district taxes apply based on the delivery address — meaning a package delivered to one side of a street may have a different rate than one delivered to the other side.
Action required: Cross-reference your Illinois customer delivery addresses against the IDOR bulletin. Update your POS and tax software before July 1. If you haven't done this yet, you have 22 days — start now. Full details in our earlier Illinois article.
Texas doesn't change its statewide 6.25% rate on July 1 — but local rates across the state are shifting.
The Texas Comptroller of Public Accounts announced multiple local sales and use tax rate changes effective July 1, 2026, impacting city, special purpose district, and combined area rates across the state. At the city level, Weston in Collin County adopted a 1.5% street maintenance tax, increasing its total local rate to 7.75%, while Taft in San Patricio County abolished its 1.75% street maintenance tax. Four Special Purpose Districts are newly imposing sales taxes, including Crawford Municipal Development District at 0.5%, Falls County Emergency Services District No. 1 at 1.5%, and Henderson County Emergency Services District No. 3 at 2%. TaxJar
Texas updates its local rates on a quarterly basis — January 1, April 1, July 1, and October 1. The July 1 cycle is typically the busiest, as it aligns with the state's fiscal year start and voter-approved measures from spring elections taking effect.
Action required: If you sell into Texas and use address-level tax calculation, verify your software is pulling the updated Texas rate tables for July 1. Pay particular attention to special purpose district boundaries — these are among the most commonly missed rate changes in Texas compliance.
The Arkansas Department of Finance and Administration has announced multiple local sales and use tax rate changes effective July 1, 2026, including newly enacted taxes, rate increases, rate decreases, and annexation-related adjustments affecting cities and counties statewide. Municipalities including Van Buren and El Dorado will implement rate increases, while Cross County and Jackson County will see rate decreases. Newly enacted local taxes will take effect in Chester and Perry, and numerous jurisdictions — including Siloam Springs, Pea Ridge, Fort Smith, Springdale, Dardanelle, Lakeview, Garfield, Highfill, Decatur, Ozark, and Powhatan — will apply updated rates due to annexations. Quaderno
Arkansas is one of the states with the most active local tax change cycles in the country. The combination of newly enacted taxes, rate adjustments, and annexation-driven boundary changes means that sellers need to verify not just the rate but the applicable jurisdiction for every Arkansas delivery address.
Action required: Pull the DFA's July 1 rate change bulletin and cross-reference your Arkansas delivery addresses. Annexation changes are particularly tricky — a customer whose address was in an unincorporated area may now be inside a city limit with a new local tax.
North Carolina's statewide rate of 4.75% holds steady — but local rates are shifting in multiple jurisdictions effective July 1.
North Carolina local sales tax rate changes take effect July 1, 2026 — businesses selling into the state should verify their current rates for each county and municipality where they have customers.
North Carolina has 100 counties, each with its own local rate. Most are at 2.25% on top of the state rate, bringing the combined rate to 7% — but variations exist, and July 1 changes affect that landscape.
Action required: Verify your North Carolina combined rates by county for July 1. Check the NC Department of Revenue's rate notice for the specific jurisdictions affected.
Oklahoma updates its local sales tax landscape on July 1 as well.
Oklahoma local sales tax rate changes take effect July 1, 2026, with multiple jurisdictions implementing new or adjusted rates. Savant Labs
Oklahoma has one of the most complex local sales tax structures in the country — cities, counties, and special districts all impose their own rates, and the combination varies significantly across the state. The Oklahoma Tax Commission publishes updated rate tables quarterly.
Action required: Verify your Oklahoma combined rates through the OTC's rate lookup tool before July 1. If you're using tax calculation software, confirm it has incorporated the Q3 2026 Oklahoma rate tables.
Vermont has been advancing legislation to impose a retail delivery fee — and if it passes, July 1 is the proposed effective date.
Vermont's House Bill 863 would impose a 30-cent retail delivery fee on taxable tangible personal property delivered in the state, effective July 1, 2026 — with no small-seller exemption, meaning all retailers registered for Vermont sales tax would be responsible.
The bill's status as of today is still pending — but the July 1 date is in the legislation. If it passes in the next few weeks, compliance obligations begin immediately.
Action required: Monitor Vermont's legislative status closely. If HB 863 passes, you'll need to add a separately stated 30-cent delivery fee to all qualifying Vermont shipments beginning July 1 — with no grace period.
Washington's ESSB 5814 — which expanded the state's retail sales tax to digital advertising, IT services, custom software, and related categories — took effect October 1, 2025. The preexisting contract transitional relief period runs through June 30, 2026.
That means July 1 is the date when every remaining transitional exemption expires.
Starting July 1, 2026, all qualifying contracts that were previously protected under the transitional relief period are now fully subject to Washington's retail sales tax and retailing B&O tax — with no remaining carveouts for preexisting agreements.
If you've been relying on the transitional relief for any Washington service contracts, that protection is gone on July 1. Every qualifying service transaction into Washington is now taxable — period.
Action required: Review every Washington service contract currently operating under transitional relief. Update your billing to collect retail sales tax on all qualifying transactions beginning July 1. If you haven't applied for the penalty relief program we covered last week for prior uncollected tax, do so before new obligations layer on top of existing ones.
This one is good news for a change.
Effective July 1, 2026, Utah enacted a state sales tax exemption for sales of food and food ingredients or prepared food sold by a home cook, including homemade food products sold at a direct-to-sale farmers market or direct-to-sale location.
If you're a home cook selling food in Utah — at farmers markets, from your home, or at other direct-to-sale locations — your qualifying food sales are no longer subject to Utah state sales tax starting July 1.
We covered the full details of this exemption in our dedicated Utah home cook article. The short version: update your POS to stop collecting state sales tax on qualifying home cook food sales. Local taxes may still apply depending on your jurisdiction.
July 1 isn't just about rate changes. It's also the end of Q2 — and quarterly filers have returns coming due in late July.
Your Q2 reporting period covers April 1 through June 30. That means:
The most common Q2 mistake: businesses that crossed an economic nexus threshold in a new state during April, May, or June — and haven't registered yet. Registration isn't retroactive protection. If you had nexus in a state during Q2 and didn't register, you owe the tax from the moment you crossed the threshold.
July 20 is the standard due date for most quarterly Q2 returns — that's 41 days away. The time to identify and fix Q2 compliance gaps is now, not July 19.
Here's everything that needs to happen before the first transaction of July 1:
One more thing worth understanding: most local sales tax changes cluster around July 1, not January 1.
Generally, state tax changes take effect January 1. But local tax changes — driven by voter-approved measures, fiscal year starts, and local ordinances — cluster heavily around July 1. TaxHero
That means businesses that do a thorough rate review in December and assume they're good for the year are typically missing half the picture. The biannual review — December for January 1, June for July 1 — is the minimum cadence for any business selling into multiple jurisdictions.
July 1, 2026 is 22 days away. That's enough time to get this right — but only if you start now.
Not sure whether all your July 1 rate changes are covered — or concerned that your tax software isn't pulling the right updated tables? Book a free consultation with our team at sales.tax. We'll audit your rate setup, identify every July 1 change that affects your business, and make sure your systems are updated before the deadline hits.