Multi-State Tax Planning for Expanding Businesses

That’s where multi-state tax planning comes in. If you’ve recently expanded or are planning to, it’s crucial to understand how different state tax laws affect your business. This guide will help you make sense of nexus rules, filing thresholds, remote worker implications, and more. We’ll also explain how your CPA plays a critical role in keeping you compliant while supporting your long-term growth strategy.

What Is Nexus and Why Does It Matter?

Before you can plan effectively, you need to understand nexus: a term that defines the connection between your business and a state that allows that state to tax you. Nexus can be triggered in different ways depending on the state and the type of tax. Once you’ve established nexus, that state can legally require you to register, collect, and remit taxes, whether it’s sales tax, income tax, or payroll tax. Common triggers include:

Hiring remote employees in a new state
Renting or owning property in a different state
Storing inventory in a warehouse or fulfillment center
Making a certain volume of sales to customers in that state
Running digital marketing or affiliate programs (click-through nexus)

Each state defines nexus differently. That means your presence in one state may create no obligations, while the exact same activity elsewhere might trigger several tax filings.

Types of Taxes Affected by Nexus

When managing multi-state tax planning, understanding how nexus relates to different types of tax obligations is essential. Expanding your reach can mean you’re on the hook for several forms of state-level taxes.

Income Tax

If you have nexus in a state, you may be required to file income tax returns there. For businesses structured as pass-through entities, this can mean multiple state returns for both the business and the owner. Some states even tax a percentage of revenue rather than net income, which can significantly increase your tax liability.

Sales Tax

Sales tax compliance has become far more complex since the Supreme Court’s Wayfair decision, which allowed states to enforce economic nexus based on transaction volume alone. That means you might owe sales tax in a state without having a physical presence there. Many states set thresholds such as:

$100,000 in annual sales
Or 200 separate transactions

Crossing either threshold means you must collect and remit sales tax, even if you’ve never set foot in that state.

Payroll Tax

Hiring remote employees is a game-changer. If you’ve hired talent from out of state, you’re likely required to withhold payroll taxes, register for state unemployment insurance, and potentially pay other employment-related taxes in that employee’s state.

Failing to do so can result in penalties and unpaid tax assessments. This is one of the most overlooked issues businesses face when navigating taxes when doing business in multiple states.

Remote Workers: A Hidden Tax Risk

Remote work has blurred state lines and made multi-state tax planning more complex than ever. If your business now employs workers in different states (even just a few), you could be exposed to multiple state tax liabilities. Remote employees may:

Trigger payroll tax nexus
Create a physical presence for business income tax purposes
Subject your business to new filing requirements

Many states are aggressively enforcing nexus rules tied to remote workers. That makes it critical to review your workforce map and understand how each employee affects your tax position.

Different Ways States Define Nexus

Understanding business nexus tax rules is tricky because there’s no national standard. Each state has its own rules and thresholds, which evolve frequently. Let’s look at the four most common types of nexus you might encounter.

Physical Nexus

This is the traditional standard: having an office, employee, or inventory in a state. Even a single remote contractor working regularly from another state could trigger physical nexus.

Economic Nexus

Many states enforce economic nexus laws based on annual sales volume or transaction count. You might never step foot in a state, but if you sell above the threshold, you’re expected to collect and remit taxes.

Affiliate Nexus

This applies when you have business relationships or affiliates in a state promoting your products or services. A common example is using local influencers or third-party marketers.

Click-Through Nexus

Some states tax businesses based on referrals from in-state websites that drive traffic and sales to your business. Even digital relationships can be enough to trigger tax exposure.

The challenge? These definitions are not consistent across states. That’s why a robust expanding business tax strategy includes tracking multiple types of nexus.

At Allmon, DiBernardo & Associates, we work with expanding businesses to help them stay compliant, reduce tax risk, and position themselves for long-term success. Discover more about our services today.

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How to Monitor and Manage Obligations as You Grow

Expansion shouldn’t slow you down, but it does require intentional tax planning. Once you understand how nexus works and what taxes are in play, you’ll need systems to monitor compliance across states.

Start With a Nexus Study

A CPA can conduct a nexus study to determine where you currently have obligations. This analysis reviews your operations, sales channels, workforce, and digital presence to identify any existing or potential exposure.

Register Where Required

If you’re found to have nexus in a state, the next step is registering your business to collect and remit the necessary taxes. This includes state income tax, sales tax permits, and payroll registration.

Implement Tax Tracking Tools

You may need software that helps monitor state-by-state sales volume, employee location, and transaction counts. These tools can alert you when you’re approaching a threshold so you can act before you’re out of compliance.

Schedule Periodic Reviews

Nexus isn’t a one-time issue. As you grow, take on new clients, or shift how you operate, your exposure will change. Partnering with a CPA ensures your strategy evolves in step with your business.

Why You Need a CPA for Multi-State Tax Planning

The truth is, multi-state tax planning is not something you can manage on your own with a spreadsheet and good intentions. State tax authorities are watching closely, and enforcement is growing more aggressive. Here’s how a CPA helps protect your business:

Keeps You Ahead of Thresholds: A CPA monitors economic and physical nexus changes to ensure you stay compliant across jurisdictions.
Manages Complex Filings: From registering in new states to preparing multi-state tax returns, your CPA handles the heavy lifting.
Advises on Structure: Your CPA can help optimize your business structure to minimize exposure and legally reduce your tax burden.
Reduces Audit Risk: Filing correctly and on time is your best defense. Your CPA ensures nothing falls through the cracks as you scale.

Having an experienced advisor gives you the confidence to grow your business without worrying that your tax exposure is growing faster than your revenue.

Simplify Your Multi-State Tax Strategy With Allmon DiBernardo & Associates

As your business expands into new states, so do your tax responsibilities. What begins as a single remote employee or a handful of out-of-state clients can quickly evolve into a web of compliance requirements. By prioritizing multi-state tax planning, you avoid surprises, reduce risk, and create a solid foundation for future growth.

At Allmon, DiBernardo & Associates, we help businesses understand and manage taxes when doing business in multiple states with clarity and strategy. Our tax experts keep you ahead of changing regulations, so you can focus on what you do best: building your business. Reach out to get started today.