MSDW Podcast: Understanding 2026 Tax Changes with Avalara's Scott Peterson

Why It Matters

The sweeping tax reforms demand rapid adaptation from businesses to avoid penalties and maintain competitiveness; leveraging AI‑driven solutions like Avalara’s can reduce compliance risk and operational cost.

Key Takeaways

• 2026 tax report predicts unprecedented transaction tax growth.
• Federal income tax shifts will ripple to state tax codes.
• States broaden sales tax to digital goods, B2B services.
• AI poised to streamline international tax compliance processes.

Pulse Analysis

The 2026 tax environment in the United States is undergoing one of its most turbulent cycles in recent memory. Federal legislation is reshaping income‑tax brackets, and those changes are cascading down to state revenue formulas, prompting a wave of adjustments across the country. At the same time, state policymakers are aggressively broadening their sales‑tax bases to capture revenue from digital products, streaming services, and even business‑to‑business software subscriptions. This expansion reflects the growing share of the economy that exists online and forces companies to track taxability across dozens of jurisdictions that previously required little or no attention.

Against this backdrop, Avalara is positioning artificial intelligence as a catalyst for compliance efficiency. By embedding machine‑learning models into its tax calculation engine, the company can automatically interpret new statutes, classify transaction types, and generate accurate tax determinations in real time. For multinational firms, AI also streamlines the complex web of international tax treaties and VAT regimes, reducing manual effort and the likelihood of costly errors. Avalara’s integration with leading ERP platforms, including Microsoft Dynamics 365, means that the AI‑enhanced logic can be applied directly within existing financial workflows, delivering end‑to‑end visibility.

For businesses that rely on Microsoft Dynamics, the implications are clear: staying compliant will require both robust tax data and the technology to process it at scale. Enterprises should evaluate their current tax engines, consider upgrading to AI‑enabled solutions, and align their finance teams with the upcoming regulatory timeline. Proactive investment now can prevent disruptive retroactive filings, protect profit margins, and provide a competitive edge as peers scramble to adapt to the rapidly shifting tax landscape.