- Monday–Friday, 8:30 a.m.–5:30 p.m.
- Tel: 213-738-6000
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Business Activities Can Create Different Obligations in Different States
A business may have tax, payroll, registration, or filing obligations outside the state where it was formed or maintains its main office. Employees, remote workers, customers, sales activity, inventory, property, services, deliveries, trade shows, acquisitions, and other business activities may create different obligations in different jurisdictions. Income tax, franchise tax, sales and use tax, payroll withholding, unemployment insurance, registration, and local filing requirements may use different standards. The following frequently asked questions explain several common multi-state tax and compliance issues that businesses should consider.
A business may have tax obligations in another state when its activities create sufficient connection, commonly referred to as nexus, with that state.
Nexus may result from activities such as:
- Having employees or representatives in the state
- Maintaining an office, warehouse, inventory, or other property
- Performing services in the state
- Making deliveries or conducting installation work
- Attending trade shows or regularly soliciting business
- Reaching a state’s economic activity or sales threshold
- Acquiring or operating another business in the state
A business may have filing or registration obligations even when it does not owe tax. Income tax, franchise tax, sales and use tax, payroll withholding, unemployment insurance, and local filing requirements may use different nexus standards.
The analysis should be performed separately for each state, each tax type, and each relevant period. State laws, thresholds, forms, and administrative procedures may change.
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Yes. An employee working from another state may create payroll, withholding, unemployment insurance, business registration, income or franchise tax, and other compliance obligations for the employer.
The result may depend on where the employee physically performs the work, whether the arrangement is temporary or ongoing, the employee’s duties and authority, the employer’s other activities, state withholding and unemployment rules, reciprocity or special rules, and local payroll taxes.
A remote-work arrangement should be reviewed before the employee begins working in the new state whenever possible.
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It may. A business may be required to register, collect, and remit sales or use tax based on physical presence, economic activity, marketplace activity, inventory, employees, or other connections with a state.
Economic nexus rules can apply even when the seller has no office or employees in the customer’s state. The business should review the taxability of its products or services, direct and marketplace sales, sales and transaction activity, inventory and fulfillment locations, exemption or resale certificates, and local requirements.
Registering in one state does not satisfy another state’s requirements. Rules and thresholds may change.
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No. Legal authorization to conduct business in a state and registration with the state’s tax agencies are related but separate matters.
A company may need foreign qualification, income or franchise tax registration, sales and use tax registration, payroll withholding, unemployment insurance, local business licenses, or industry-specific permits.
A company may have a tax filing obligation even when it has not completed legal registration, and legal registration may trigger continuing reports or filings even with limited activity.
ABC CPAs assists with accounting and tax registration matters and may coordinate with legal counsel regarding entity qualification and other legal requirements. ABC CPAs does not provide legal services.
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ABC CPAs supports clients with multi-state operations across the United States.
Depending on the engagement, assistance may include reviewing business activities by state, identifying potential nexus and filing obligations, evaluating income, franchise, sales, use, payroll, and local tax requirements, assisting with state tax registrations, preparing or coordinating returns, reviewing notices and filing history, evaluating prior-period exposure, supporting remediation matters when appropriate, coordinating accounting and payroll information, and working with attorneys and other advisers.
Multi-state compliance is not a one-time determination. Employee locations, sales, inventory, acquisitions, remote work, and business operations should be reviewed as they change.
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Common Multi-State Compliance Areas
State Income and Franchise Tax
Business activities, employees, property, sales, or other connections may create state income, franchise, privilege, or similar filing obligations.
Sales and Use Tax
A business may need to register, collect, remit, or file sales and use tax returns based on physical presence, economic activity, inventory, sales channels, and the taxability of its products or services.
Payroll and Employer Taxes
Employees and remote workers may create payroll withholding, unemployment insurance, local employer tax, registration, and other employer-related obligations.
State and Local Registrations
A business may need separate legal, tax, payroll, sales tax, unemployment, local, or industry-specific registrations.
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Tax Audit Service
Explore Tax Audit ServicesDoes Your Business Operate in More Than One State?
Multi-state obligations depend on where the business has employees, customers, sales, property, inventory, services, locations, transactions, and other business activities.
Contact ABC CPAs to discuss potential state income, franchise, sales, use, payroll, registration, filing, or prior-year compliance matters.
- Email: [email protected]
- Tel: 213-738-6000
- 3435 Wilshire Blvd Suite 600, Los Angeles, CA 90010
- Monday–Friday, 8:30 a.m.–5:30 p.m.
Resource Center Notice
The information provided in this Resource Center is for general informational purposes and is not intended as legal, investment, valuation, or other non-CPA professional advice. Accounting and tax requirements may vary based on the facts, jurisdictions, entity structure, reporting period, and applicable laws and regulations. Information may also change after publication. You should consult the appropriate accounting, tax, legal, financial, or other professional adviser regarding your specific circumstances. Accessing or using this Resource Center does not by itself create a professional engagement with ABC CPAs.