Before 2018, the rule was comfortingly physical. A business owed sales tax where it had presence — an office, a warehouse, staff, inventory. If you operated from one state, you generally filed in one state.
South Dakota v. Wayfair ended that, and most small businesses have not fully absorbed what replaced it.
Economic nexus, briefly
States may now require sales tax collection based purely on economic activity within the state. No office, no employee, no inventory required.
Thresholds vary but cluster around $100,000 in sales into the state, or a transaction count in the region of 200. Some states use one test, some either. Once crossed, the obligation to register, collect and remit begins — whether or not anyone told you.
For a business selling online, or shipping to customers across the southeast, crossing several of these thresholds is entirely routine and completely invisible from inside the business.
Why it goes unnoticed
Nothing happens when you cross a threshold. No notice arrives. Your sales system does not flag it. The obligation simply begins, and each month it goes unmet the accrued liability grows.
Businesses typically discover the problem in one of three ways: during due diligence when they try to sell, when a state’s data-matching identifies them, or when a customer asks why they were not charged tax.
The first is expensive because it delays or reprices a transaction. The second is expensive because the lookback period is generally unlimited once the state finds you. The third is, comparatively, a gift.
What to do if you think you have exposure
The productive route is a voluntary disclosure agreement.
Approach the state before it approaches you and most will limit the lookback to three or four years and abate penalties, leaving tax and interest. Wait to be found and the lookback is typically open-ended with penalties attached. The difference between the two outcomes is frequently the majority of the total cost.
There is one important sequencing point: voluntary disclosure is only available while you are genuinely undiscovered. Once the state has contacted you, that door closes. So the calculation is not “should we deal with this eventually” — it is “should we deal with this while the favourable option still exists.”
A practical first step
Pull your sales by ship-to state for the last three years and compare each against that state’s threshold in the relevant year.
That single report tells you where you are clearly fine, where you are clearly exposed, and where you are approaching a line. It takes very little time and it converts an unbounded worry into a specific, finite list.
Most businesses that run it find one or two states to deal with, not fifteen. That is a manageable conversation — and considerably more manageable now than during a sale process.