State Sales Tax Nexus for Remote Service Providers

Quick overview

State sales tax nexus decides whether a state can make a remote service provider collect and remit sales tax for sales to customers in that state. After the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (2018), many states use economic-presence rules as well as traditional physical-presence tests to establish nexus (see the Supreme Court ruling). Nexus rules differ by state, and remote services—like SaaS, digital subscriptions, consulting, and marketing—require careful, state-by-state analysis.

Why the Wayfair decision matters

Before 2018, many states relied on physical presence to trigger sales tax obligations. South Dakota v. Wayfair allowed states to require remote sellers to collect sales tax based on economic presence, not just a storefront or warehouse. That change is the reason so many remote service providers now face obligations in states where they never had offices or inventory (South Dakota v. Wayfair, 585 U.S. 17 (2018)).

Authoritative resources tracking state approaches include the Tax Foundation and the National Conference of State Legislatures (NCSL). These sources document how states set economic thresholds and how those rules evolve (Tax Foundation; NCSL).

Common nexus triggers for remote service providers

Nexus can be established in several ways. Most states use a combination of these tests:

• Physical presence: offices, employees, inventory, or regular in-state business activities.
• Employee or contractor presence: remote employees, sales reps, or independent contractors working in a state can create nexus.
• Affiliate or agent activity: marketing affiliates, referral partners, or businesses with in-state agents may create nexus under ‘‘click‑through’’ and agency rules.
• Marketplace facilitators: in many states, marketplaces that facilitate sales (e.g., platforms that bill customers or remit payments) are required to collect tax on behalf of sellers.
• Economic nexus: thresholds based on sales dollar amounts and/or number of transactions (for many states this includes rules such as $100,000 in sales or 200 transactions, but thresholds vary and some states use higher or different metrics).

Note: thresholds and specifics vary by state. The Tax Foundation and NCSL maintain current tables and summaries of state thresholds and rules—consult them for detailed per‑state figures (Tax Foundation; NCSL).

How nexus applies to different service types

Services are taxed differently across states. Key examples:

• SaaS and digital subscriptions: some states tax access to software or subscriptions as taxable services or as tangible personal property; others exempt them. See our guide on State Sales Tax Obligations for SaaS Providers: What to Know for service‑specific details.

• Professional services and consulting: many states exempt pure professional services, while others tax them or tax related tangible deliverables—so the same engagement could be taxable in one state and exempt in another.

• Digital marketing, advertising, and creative services: states differ widely—advertising services are taxable in some jurisdictions and exempt in others. Be precise about the deliverable and how the state defines taxable services.

For a broader look at how nexus rules affect remote and online businesses, consult our related article How State Sales Tax Nexus Rules Affect Remote and Online Businesses.

Sourcing rules: where is the sale taxed?

States follow sourcing rules to decide the taxing jurisdiction. For services, sourcing can be based on the customer’s location, where the service is performed, or where the benefit is received. These sourcing rules change the practical impact of nexus. For example, a service performed remotely for a client in State A may be sourced to State A and therefore subject to State A’s tax rules.

See our primer on State Sales Tax Sourcing Rules: Where Sales Are Taxed and Why It Matters for detailed examples.

Steps to assess and manage nexus (practical checklist)

1. Map your footprint: list employees, contractors, offices, servers, and any affiliates or agents by state. Include remote freelancers if you control their work or integrate them into your operations.
2. Measure economic activity: track gross sales and transaction counts by state on a rolling 12‑month basis (or the lookback period the state requires).
3. Review product/service taxability: classify offerings (SaaS, consulting, digital goods, bundled services) against each state’s taxable definitions.
4. Register and collect where required: once nexus is established, register for a sales tax permit and begin collecting and remitting tax per the state’s filing schedule.
5. File and document: keep records of registrations, exemption certificates, and filing history. Retain customer location evidence (IP, billing address, signed certificates) to support sourcing and exemption positions.
6. Use automation: deploy tax engines (Avalara, TaxJar, Taxamo, or built-in ERP modules) to rate, collect, and remit sales tax automatically.

Managing past exposure and voluntary disclosure

If you discover past uncollected tax exposures, contact the state’s voluntary disclosure or amnesty program promptly. Many states offer reduced penalties and limited lookback periods if you self‑report before the state opens an audit. Work with a sales tax specialist to estimate liability, negotiate lookback terms, and prepare registrations.

Common mistakes I see in practice

• Assuming all services are non‑taxable—service taxability is state‑specific.
• Ignoring contractors and remote employees as nexus creators—states increasingly assert nexus from remote workers.
• Failing to track transaction counts and rolling revenue—economic nexus can be triggered quickly in high‑volume businesses.
• Waiting to address nexus until audited—self‑assessment and voluntary disclosure reduce penalties.

In my practice advising SaaS and digital agencies, the most common surprise comes from an overlooked contractor or a referral partner whose activity created nexus. Regular nexus reviews catch these before they become crises.

Practical examples

• A California design firm sells recurring website maintenance subscriptions to clients nationwide. While California looks to physical and economic factors, some states tax those subscriptions and require registration once thresholds are met—often based on revenue or transaction counts.
• A marketing company hires contract writers in several states. Those contractors’ presence and work can trigger nexus, especially if they solicit or bill clients from those states.

These scenarios underscore why granular tracking and state‑by‑state reviews matter.

Tools and resources

• Tax Foundation — state nexus and economic threshold research (Tax Foundation).
• National Conference of State Legislatures (NCSL) — state-by-state summaries and legislative tracking (NCSL).
• South Dakota v. Wayfair, 585 U.S. 17 (2018) — the Supreme Court decision that enabled economic nexus (SCOTUS).

Regulatory updates and detailed threshold tables change frequently; use the above sources for current state rules.

Interlinking guides on FinHelp.io

• For compliance steps specific to SaaS businesses, see: State Sales Tax Obligations for SaaS Providers: What to Know.
• For broader nexus implications for remote and online businesses, see: How State Sales Tax Nexus Rules Affect Remote and Online Businesses.
• For collection best practices useful to remote sellers, review: Sales Tax Collection Best Practices for Online Sellers.

FAQs (brief)

Q: Do I always need to collect sales tax if I have a remote employee in a state?
A: Not always, but an employee or contractor in a state is a common nexus trigger. Check the state’s statute and guidance and consult a tax professional.

Q: Are marketplace sales treated differently?
A: Yes. Most states now require marketplace facilitators to collect and remit tax on behalf of sellers—confirm the rules that apply to platforms your business uses.

Q: How far back can a state audit or assess tax?
A: Audit lookback periods vary by state and specific circumstances. Voluntary disclosure programs often limit the lookback window if you come forward proactively.

Final recommendations (practical next steps)

• Schedule a quarterly nexus review using ledger data and headcount/location reports.
• Classify offerings against state taxability rules and document supporting evidence.
• Implement a tax automation tool for real‑time rate and collection where you have customers.
• Engage a sales tax specialist early if you have multi‑state customers, contractors, or affiliates.

Professional disclaimer

This article is educational and reflects general best practices and common state approaches as of 2025. It is not legal or tax advice. For advice tailored to your facts and jurisdiction, consult a licensed tax professional or state tax agency.

Sources & further reading

• South Dakota v. Wayfair, Inc., 585 U.S. 17 (2018).
• Tax Foundation — surveys and state-by-state nexus summaries (https://taxfoundation.org).
• National Conference of State Legislatures — sales tax and nexus tracking (https://www.ncsl.org).
• FinHelp.io related guides: see links above for SaaS, nexus rules, and collection best practices.