Where Does Your Business Actually Owe Sales Tax?
Sales tax compliance means registering in every state where your business has nexus, collecting the correct rate on taxable products and services, filing returns on each state's schedule, and remitting on time — and a business can owe sales tax in a state it has never set foot in.
What Is Sales Tax Nexus and Why Does It Matter?
Nexus is the connection between your business and a state that gives that state the right to require you to collect and remit sales tax. Before 2018, nexus almost always meant a physical presence — an office, a warehouse, an employee. The U.S. Supreme Court's decision in South Dakota v. Wayfair changed that. Since then, states have been allowed to impose sales tax obligations on sellers who cross a dollar or transaction threshold, even if the seller has no physical presence in that state at all. Most states moved quickly to adopt their own economic nexus rules after the decision, and the thresholds vary state by state. There is no single rule that covers all of them.
Physical Nexus: The Connections You Can See
Physical nexus is created by a tangible presence in a state. That includes an employee or contractor working there, inventory stored in a warehouse — including stock held by a third-party fulfillment center the seller never visits — equipment, a job site, or salespeople traveling in to call on customers. If any of those apply, the state can require registration and collection regardless of how much or how little you sell there.
Economic nexus is created by sales volume alone. Most states set the threshold at $100,000 in sales into the state in the current or prior calendar year. Some states pair that with a transaction count — 200 transactions is common — while others have dropped the transaction test and rely on the dollar threshold only. Each state sets its own rules, which means the answer to whether you have nexus in a given state is a state-by-state review, not one calculation applied everywhere. That review has a name people search for: a sales tax nexus study. It is where the engagement starts, and the list of states comes back in writing before anything gets registered.
If you are already selling into more than one state, there may be an income tax filing question in those same states sitting alongside the sales tax one.
Economic Nexus: The Connections You Cannot See
Does Selling Through a Marketplace Mean You Are Covered?
Products, Software, and Digital Goods
This is the most common wrong assumption in this category. Marketplace facilitator laws put the collection and remittance obligation on the marketplace for sales made through it — so Amazon, Etsy, or a similar platform collects and remits on your behalf for those transactions. That does not settle your own registration position, and it does not cover sales you make through your own website, your own invoices, or any wholesale channel. Those sales are counted separately when a state measures whether you have crossed its threshold. If your marketplace sales push you over the line in a state, your direct sales in that same state may still require registration even though the marketplace is handling its own piece.
Contractors: Materials, Labor, or the Whole Invoice?
The same item can be taxable in one state and exempt in the next. Software, digital products, and subscriptions are treated inconsistently across states — some tax them as tangible personal property, some exempt them, and some have carved out specific categories with their own rules. Services follow a similar pattern: taxable in some states, entirely exempt in others, with a handful of states taxing only specific service categories. Before you can file correctly in a state, you need to know not just that you have nexus there but what you are actually required to collect on.
What Is Actually Taxable Depends on the State
States split on how they treat a contractor improving real property. Some states treat the contractor as the end consumer of the materials — the contractor pays sales tax when buying them and does not collect from the customer. Other states treat the job as a retail sale plus installation, which means the contractor collects sales tax from the customer on the materials, the labor, or both. The answer changes at the state line, and getting it wrong in either direction creates a problem. Fifteen years of work with roofers, painters, framers, concrete crews, and remodelers is behind how we read these rules. That depth belongs in the analysis, not just in the conversation about it.
Products, Software, and Digital Goods
The same item can be taxable in one state and exempt in the next. Software, digital products, and subscriptions are treated inconsistently across states — some tax them as tangible personal property, some exempt them, and some have carved out specific categories with their own rules. Services follow a similar pattern: taxable in some states, entirely exempt in others, with a handful of states taxing only specific service categories. Before you can file correctly in a state, you need to know not just that you have nexus there but what you are actually required to collect on.
Contractors: Materials, Labor, or the Whole Invoice?
States split on how they treat a contractor improving real property. Some states treat the contractor as the end consumer of the materials — the contractor pays sales tax when buying them and does not collect from the customer. Other states treat the job as a retail sale plus installation, which means the contractor collects sales tax from the customer on the materials, the labor, or both. The answer changes at the state line, and getting it wrong in either direction creates a problem. Fifteen years of work with roofers, painters, framers, concrete crews, and remodelers is behind how we read these rules. That depth belongs in the analysis, not just in the conversation about it.
Exempt Sales and Resale Certificates
If your customers are reselling what they buy from you, they should be handing you a resale certificate so you do not collect tax on a sale that will be taxed downstream. Keeping those certificates current and organized is part of compliance — a state examining your records will ask for them, and a missing certificate can turn an exempt sale into a taxable one retroactively. Each state has its own certificate format, and some states require periodic renewal.
Rates and Jurisdictions
There are more than 12,000 taxing jurisdictions in the United States — states, counties, cities, and special districts each with their own rate. Charging the wrong rate is its own compliance failure, separate from the question of whether you were registered. Setting up your point-of-sale system or invoicing process to pull the right rate for the right address in the right state is part of what makes the engagement work once registrations are open.
Florida Sales and Use Tax
Each state runs its own registration, rate structure, and return schedule. Florida sales and use tax filing — including the DR-15 return, the applicable rates, and the filing calendar for Florida-based businesses — is covered in detail on the Florida page.
Taxability Is Not a One-Time Question
States update their rules. A product that was exempt last year may be taxable this year. A rate that applied to one jurisdiction may have changed after a local election. Staying current on what you owe, where you owe it, and at what rate is an ongoing part of compliance — not something you resolve once and set aside.
How the Work Gets Done
Sales tax compliance is a sequence, and skipping steps creates problems downstream. Here is how the engagement runs.
Step 1 — Nexus Study
We review where your sales, people, and inventory sit against each state's own thresholds. Physical connections and economic thresholds are both examined. The output is a written read on which states require registration and which do not, based on your actual numbers.
Step 2 — Registration
We open registrations in the states that require them, in the order that makes sense given your volume and exposure. Each state has its own registration process, timing, and requirements. We handle that.
Step 3 — Rate Setup and System Integration
Once registrations are open, your point-of-sale system or invoicing process needs to charge the right rate for the right address in each state. We get that configured and make sure it is talking to your accounting software correctly.
If your books need to be in order before the sales data can be pulled cleanly by state, that work runs through bookkeeping and write-up services.
Step 4 — Filing Calendar
Every state you are registered in has its own due dates and filing frequency — monthly, quarterly, or annual, depending on your volume in that state. We build the calendar and own it.
Step 5 — Returns and Remittance
Returns are filed on schedule and tax is remitted to each state. In months where you had no sales into a registered state, a zero return is still filed. A registration that goes quiet does not go away — it still has to report. What you are left holding is a due-date list you no longer have to watch.
What If You Are Already Behind?
Being behind on sales tax is a workable problem. Most states run a voluntary disclosure program that limits how far back they will look and generally sets penalties aside for a business that comes forward before the state makes contact. That door closes once a notice arrives — the same program is not available after a state has already reached out.
Working Out the Exposure First
Uncollected tax on past sales is usually the larger number, and the right order is to work out what the exposure actually looks like before deciding which states to register in and when. We will tell you what the number looks like before you decide anything. No promise about what any state will accept — but the exposure is knowable, and knowing it is where the work starts.
If a Notice Has Already Arrived
A state sales tax audit notice changes the options. Voluntary disclosure is no longer available, but the examination itself can still be managed. We represent businesses in state sales tax audits — reviewing the period under examination, responding to the state's information requests, and working through the findings. The same plain-spoken approach applies: you will know what the state is looking at and what the response is before it goes out.
What Sales Tax Compliance Work Costs
We do not publish a flat fee for this work, because the number moves based on what is actually involved. What drives it:
- How many states are in play, both for registration and ongoing returns
- How many returns each state requires per year based on your volume there
- Whether your sales data can be pulled cleanly by state from your accounting system or has to be rebuilt
- Whether registrations still need to be opened or are already in place
- Whether there are prior periods to resolve before the current compliance calendar starts
The conversation about cost starts with a review of where you sell and what your books currently show. That gives us a real number to work from rather than a range that does not mean anything.
A Note on Who Does This Work
Do I have to collect sales tax in a state where I have no office or employees?
You may. Since the 2018 South Dakota v. Wayfair decision, states can require collection from sellers who cross a dollar or transaction threshold — commonly $100,000 in sales into the state — even with no physical presence there. Whether you have crossed a given state's threshold is a state-by-state question, not a single calculation.What is economic nexus?
Economic nexus is a sales tax obligation created by volume alone, without any physical presence in a state. Most states set the threshold at $100,000 in sales into the state in the current or prior calendar year. Some states add a transaction count; others rely on the dollar threshold only. Each state sets its own rules.My marketplace collects sales tax for me. Does that mean I am fully covered?
For sales made through the marketplace, yes — the marketplace facilitator collects and remits on your behalf. But sales you make through your own website, your own invoices, or any wholesale channel are counted separately. If those direct sales push you over a state's threshold, you may still need to register and collect in that state even though the marketplace handles its own piece.I should have been collecting sales tax in several states and was not. What happens now?
Most states run a voluntary disclosure program that limits the lookback period and generally sets penalties aside for a business that comes forward before the state makes contact. That program is not available once a notice has arrived. The first step is working out what the exposure actually looks like — uncollected tax on past sales is usually the larger number — and then deciding the order of registrations from there.Do I have to file a return in a state where I had no sales that month?
Yes, if you are registered there. A registration that goes quiet does not go away. Most states require a zero return for any filing period in which you had no sales, and missing that filing can trigger a penalty even though no tax was owed. Managing the filing calendar — including zero returns — is part of what we handle once registrations are open.
