Hi,
If you sold into states where you have no office and no employees, and you crossed $100,000 in sales into any one of them last year, you may already have an obligation there – and no state will notify you that it started.
Here’s why it works that way. Since 2018, a state can require you to collect its sales tax based purely on how much you sell into it – no office, no warehouse, no employee there. Cross the line and the obligation attaches:
- $100,000 in sales is the threshold in 41 of the 46 jurisdictions that tax
- $500,000 in California, New York and Texas. $250,000 in Alabama and Mississippi
- New York needs both – over $500,000 and more than 100 transactions. A business with $2M of New York revenue across 40 large orders has no economic nexus there at all
- Seventeen states have now dropped the 200-transaction test, Illinois in January and Kentucky in August. Fourteen states, Puerto Rico and D.C. still have one
Here’s what makes this different from every other tax you deal with:
- You were supposed to collect it from your customer. If you didn’t, the state still wants it – from you. That money was never in your pricing
- The clock starts the day you had nexus, not the day the state finds you
- In most states there is no statute of limitations on a period where no return was ever filed. The lookback can reach back to the nexus date itself. Not three years – all of it
And two things that catch people who assume they’re fine:
- Filing only one state income tax return doesn’t mean you’re clear. Income tax nexus and sales tax nexus are different tests. The federal protection that keeps many businesses from filing income tax returns in states they ship into has never applied to sales tax
- One remote employee creates nexus immediately – no dollar threshold, no grace period. If you’ve hired anyone outside your home state since 2020, that’s a date worth checking
Now the part worth acting on. Nearly every state runs a voluntary disclosure program. Come forward before they contact you and the state typically caps the lookback at three or four years and waives penalties entirely. Same tax, a fraction of the exposure.
That option closes the moment they reach you first. Once an audit notice or a nexus questionnaire lands, eligibility is generally gone – and you’re back to unlimited lookback with penalties applied. It’s a deadline with no date on it, which is exactly why it gets ignored.
The reason this catches good businesses is that nothing in your books flags it. Your bookkeeper records revenue, not revenue by destination state against 46 separate thresholds. Your preparer sees the annual total. Nobody is watching the line you’re about to cross. That’s why we put everything under one roof:
- Monthly and annual bookkeeping with a dedicated bookkeeper
- Full-service payroll, multi-state, plus contractor 1099s
- Sales tax compliance – nexus reviewed against your actual sales by state, registrations handled, returns filed
- Quarterly tax estimates so you know what you owe before April
- Every filing obligation mapped on one calendar, so nothing surfaces the week it’s due
- A full one hour review of every credit and deduction you qualify for – by the same team that files your return
- Personal and Business tax returns handled by the same team
Reply to this email by Monday next week and we’ll set up a free 15 minute call with our senior tax advisor to go over where you’re selling and whether you’ve crossed anything. Bring your last invoice from your tax advisor/strategist, tax preparer, bookkeeper and payroll provider – so we can discuss how you can have everything under one roof.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com