Sales & Use Tax Exposure Reviews: What Triggers Nexus Liability?
⚖️ The Wayfair Decision Changed Everything
In 2018, the U.S. Supreme Court issued its decision in South Dakota v. Wayfair, fundamentally changing how states determine sales and use tax nexus.
Prior to Wayfair, states generally required a physical presence — such as an office, warehouse, or employees — before imposing a sales tax filing obligation. Wayfair overturned that standard and opened the door for economic nexus, allowing states to impose tax obligations based on sales activity alone.
Since that ruling, nearly every state with a sales tax has updated its laws or issued guidance expanding nexus rules for remote sellers, online businesses, and service providers.
📊 Common Economic Nexus Thresholds
Most states modeled their nexus standards after South Dakota’s law, which has become the informal benchmark.
The most common thresholds include:
- $100,000 in gross sales into a state, and/or
- 200 separate transactions into a state during the year
Many states apply either test, while others require exceeding both. Importantly, these thresholds can include:
- Taxable and non‑taxable sales
- Marketplace sales
- Digital products or SaaS in certain states
We help business owners simplify operations — and avoid costly mistakes.
🔄 Ongoing Sales Tax Trends to Watch
Sales tax rules continue to evolve as states adapt to new revenue models and modern business structures.
Key trends include:
- Marketplace facilitator rules shifting collection responsibilities
- States removing transaction‑count thresholds to reduce administrative burden on small sellers
- Expansion of taxability for digital goods, subscriptions, and software
- Alternative tax structures, such as Arizona’s Transaction Privilege Tax (TPT), which taxes the seller rather than the transaction itself
These changes often increase compliance risk for businesses that assume “nothing has changed.”
🚨 Often Overlooked Activities That Create Nexus
Many businesses discover sales tax exposure only after an audit — typically because nexus was triggered unintentionally.
🏠 Remote Employees or Contractors
Employees or contractors working remotely in another state — even short‑term — can establish physical presence nexus.
🎪 Trade Shows and Temporary Events
Exhibiting at a trade show or industry event can be enough to create nexus, even if no sales are made onsite.
🚗 Traveling Sales or Service Visits
One sales call, installation, or service visit may create nexus in states with strict physical presence rules.
📦 Inventory in Third‑Party Warehouses
Storing inventory in fulfillment centers (such as Amazon FBA) can create nexus — even if you never enter the state.
🛒 Marketplace Facilitator Sales
Some states still require registration or reporting even if the marketplace collects tax on your behalf.
🔗 Affiliate or Click‑Through Arrangements
In‑state affiliates, referral agreements, or targeted advertising can trigger nexus under affiliate rules.
🧮 Exempt Sales and SaaS Transactions
Exempt or resale transactions are often included when calculating nexus thresholds — a common oversight.
🏛️ Local Rules in Home‑Rule States
States like Colorado, Louisiana, and Missouri allow local jurisdictions to impose their own filing and rate requirements, significantly increasing complexity.
✅ Proactive Steps to Manage Sales Tax Risk
Sales tax nexus is no longer static or predictable. Businesses that sell across state lines should take a proactive approach by:
- Monitoring state‑by‑state sales activity
- Reviewing employee and operational footprints regularly
- Understanding how marketplaces and digital products are treated
- Addressing exposure before receiving an audit notice
At Jackson Titus & Associates, we help businesses identify hidden nexus risks, evaluate prior exposure, and develop practical compliance strategies that align with how your business actually operates.
