A Small Business Guide To Understanding Multistate Tax Obligations

InnovationA Small Business Guide To Understanding Multistate Tax ObligationsByNicholas Pasquarosa,Forbes Councils Member.for Forbes Technology CouncilCOUNCIL POSTExpertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based)May 21, 2026, 09:00am EDTNick Pasquarosa is the Founder & CEO of Bookkeeper360, a 100% U.S.-based fintech firm specializing in accounting and advisory solutions. gettyMany business owners are caught off guard by multistate tax requirements because they don't know when their business has triggered "nexus." That's the critical connection that makes a state require you to file and pay taxes there.​In my position as the founder and CEO of Bookkeeper360, this is something I see time and time again, especially in the technology industry, where workforces and clientele are spread nationwide.If you're growing your business across state lines or selling online across the U.S., understanding multistate tax obligations isn't optional. It's essential.​What Creates A Sales Tax Obligation In Another State?"Nexus" is a legal term that means your business has enough presence in a state to trigger tax-filing requirements. Nexus happens in two ways. Physical nexus occurs when you have a tangible presence: an office, warehouse, employees, independent contractors or inventory storage. If you're at a trade show in another state taking orders, that counts, too.​Economic nexus means you've hit a sales threshold in a state and now owe taxes there. Most states set thresholds between $100,000 and $250,000 in annual sales. Once you cross that threshold, you're required to register and collect taxes, even if you've never been to the state. This matters most for e-commerce businesses selling online.​Federal Versus State Withholding Income Tax For EmployeesFederal income tax withholding follows consistent IRS rules everywhere. States, howe...