Economic nexus is having enough of a connection with a state that a filing requirement and potential tax payments would be triggered even if you or your company has no physical presence in a state.
Out of the 45 states with a sales tax, all but Missouri currently have an economic nexus law in place. (Missouri has a law that will begin in 2023.) While the so-called "Wayfair threshold" is $100,000 in gross receipts or 200 or more transactions into a state, there is a variety of responses from the states in determining their own thresholds. Some states focus on retail sales and ignore wholesale. Some states only focus on volume of sales and not transactions. Some states have both!
While Wayfair economic nexus laws are specific to sales tax, 17 states have some sort of economic nexus threshold for other types of tax as well, be it for income tax, franchise tax, or gross receipts tax. These thresholds are usually based on gross receipts or sales but can also be based on payroll or property within a state. With the transition to a remote work force, you should analyze the state where your company has payroll to determine if there are any additional tax implications from having an employee in the state as well if an analysis has not already been completed.
If you aren’t sure of these thresholds or just want to know more about a specific state or states and your potential exposure, Porte Brown can perform a nexus study and answer your economic nexus questions!
If you have any other questions, please feel free to contact Kelly Switt, Ashley Trabaris, or Marie Straka at 847-956-1040.
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