Key Takeaways

• Some businesses may be able to eliminate sales tax registrations they no longer need, reducing filing and administrative costs.
• Nexus is only the first step. Businesses must also determine whether a sale is taxable, where it should be sourced, and which rate applies.
• Ecommerce, SaaS, digital, and service businesses should regularly review their tax system configurations and customer data.
• Remote employees can create state tax and payroll obligations, even when sales remain below a state’s economic nexus threshold.

Expanding into new states, launching digital offerings, and hiring remote employees can create valuable growth opportunities. They can also introduce unexpected tax obligations, administrative costs, and financial exposure.

Recent changes to state economic nexus thresholds may allow some businesses to eliminate unnecessary registrations. However, determining where your business has nexus does not confirm that you are calculating sales tax correctly. A company can register in every required state and still collect the wrong amount because a product was classified incorrectly, a sale was assigned to the wrong location, or its tax system relied on inaccurate customer data.

For multistate businesses, a periodic nexus study may no longer be enough. A broader sales tax review can identify potential savings and uncover costly compliance gaps.

Could Changing Nexus Thresholds Reduce Your Costs?

Following the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair, states adopted economic nexus rules requiring certain out-of-state businesses to collect and remit sales tax. Many states applied these rules when a business exceeded either a sales-dollar threshold or a specified number of transactions.

That landscape is changing. As of August 1, 2026, 16 states had eliminated the commonly used 200-transaction threshold. Alaska’s remote seller commission also eliminated the threshold for participating local jurisdictions. This may benefit businesses that make numerous low-dollar sales into a state but remain below its sales-dollar threshold.

Business owners should:

• Compare sales by state with current nexus thresholds.
• Identify registrations triggered only by transaction volume.
• Calculate the filing, software, and administrative costs associated with each registration.
• Review state requirements before canceling a registration.

Eliminating an unnecessary registration could reduce compliance costs. Deregistration, however, should not be automatic. Thresholds, measurement periods, and the sales included in the calculation vary by state. Some states also require businesses to continue collecting and filing after the activity that created nexus ends.

Nexus Is Only One Part of the Analysis

Determining where your business has nexus answers where you may have an obligation to collect sales tax. It does not answer several other important questions:

• Is the product or service taxable?
• Where should the sale be sourced?
• Which state and local rate applies?
• Does the customer qualify for an exemption?
• Is the transaction mapped correctly in your tax or billing system?

These questions become more complicated as a business adds products, services, sales channels, and customer locations. States do not always apply the same taxability definitions or sourcing rules. Local rates can add another layer of complexity.

As a result, a company may be properly registered but still face exposure because it calculated or documented the tax incorrectly.

Why Ecommerce, SaaS, and Service Businesses Face Added Risk

Ecommerce, SaaS, digital, and technology businesses often process high transaction volumes across numerous jurisdictions. States may treat software, subscriptions, digital products, and related services differently. Taxability may depend on how an offering is delivered, used, described, or bundled with other services.

Professional service businesses may encounter similar issues when they add technology, data, software, or digital components to their offerings.

For these businesses, accurate tax calculations depend on well-maintained systems and data. Common problems include:

• Products or services assigned to the wrong tax category
• New offerings introduced without a taxability review
• Incomplete or outdated customer addresses
• Marketplace and direct sales tracked incorrectly
• Missing or expired exemption certificates
• Tax engines that have not been configured or tested properly

A business can correctly determine that it has nexus and still calculate the wrong tax because its product mapping, sourcing method or customer-location data are inaccurate.

Why Accurate Location Data Matters

Inaccurate location data can cause a business to collect too much tax from customers, collect too little and absorb the difference later, or report sales to the wrong jurisdiction.

Illinois illustrates the potential financial impact. Effective January 1, 2026, Illinois eliminated its 200-transaction economic nexus threshold. The state also requires sufficient information to determine the location of destination-based sales. If that information is unavailable, the Illinois Department of Revenue may assess qualifying receipts assigned to undetermined locations at a 15% rate.

Businesses should maintain reliable billing, delivery and shipment information, along with contracts and invoices that clearly describe what was sold. Strong transaction data can reduce audit exposure and improve the accuracy of tax calculations.

How Can Remote Employees Create Tax Obligations?

Sales are only one part of a company’s state tax footprint. An employee working in another state may create a physical connection to that state even when the business remains below its economic sales threshold.

Depending on the states involved, remote work may affect:

• Payroll withholding and unemployment insurance
• State or local income and business taxes
• Sales tax nexus
• Workers’ compensation and employee benefits

Businesses should record employees’ physical work locations during onboarding and establish a process for reporting moves or extended work from another state. Human resources, payroll, accounting, and tax personnel should share that information promptly.

What Should a Multistate Tax Review Cover?

A broader review should evaluate whether the company is calculating, collecting and documenting tax correctly. It may include:

• Sales and existing registrations by state
• Taxability of products, software, and services
• State and local sourcing rules
• Product and service mappings
• Customer and transaction-location data
• Tax rates applied to sample transactions
• Exemption certificates
• Employee work locations
• Planned expansion into new markets

This analysis can identify both overlooked obligations and compliance costs that may no longer be necessary.

Protecting Profitability as Your Business Grows

Expansion decisions should account for where growth occurs, what the business sells and how transactions are processed—not simply how much revenue increases.

Before entering a new market, launching an offering or hiring in another state, consider registration and filing costs, tax-system needs, payroll administration and professional fees. Understanding those costs in advance can help management price offerings appropriately, protect margins and avoid unexpected liabilities.

Nexus remains an essential part of multistate tax compliance, but it should not be the end of the analysis. If your company has expanded into new states, added products or services, hired remote employees or changed tax systems, it may be time to look beyond nexus and evaluate your complete multistate tax position.

Frequently Asked Questions

What is economic nexus?

Economic nexus is a tax connection created when a business exceeds a state’s sales or transaction threshold, even if it has no physical location there. Once nexus is established, the business may be required to register and collect sales tax.

Is a nexus study enough to confirm that our sales tax is correct?

Not necessarily. A nexus study identifies where your business may have a collection obligation. A broader review should also consider whether your products and services are taxable, where sales should be sourced, which rates apply and whether your tax systems are configured correctly.

Can my business cancel a registration when a state eliminates its transaction threshold?

Possibly, but deregistration is not automatic. Your business should review the state’s current dollar threshold, measurement period and trailing nexus requirements before canceling a registration or discontinuing collection.

Why are SaaS and digital businesses particularly vulnerable to sales tax errors?

States treat software, subscriptions, digital products and related services differently. Taxability may depend on how an offering is delivered, used, described or bundled. Incorrect product mapping or customer-location data can produce the wrong result even when a tax engine is used.

Can a remote employee create tax obligations in another state?

Yes. Depending on the states and working arrangement involved, an employee’s physical work location may create sales tax nexus as well as payroll withholding, unemployment insurance, income tax or other employer obligations.

When should a business conduct a multistate tax review?

A review may be appropriate when the business enters new states, launches products or services, changes sales channels, hires remote employees or implements new billing or tax systems. Periodic reviews can also help identify registrations that may no longer be required.