Maintenance
Part of 7 points worth checking on state business tax
Where the state business tax examples agree, and where they do not in 2027
State business tax examples: six invented footprints showing how presence creates a claim, where each answer lives, and who is qualified to give it.
What to take away
- A state claim starts with a facta person working there, goods delivered there, a crew on site. Intent plays no part.
- Sales tax nexus turns on dollars alone in South Dakota and Illinois. New York still requires dollars and transactions.
- An employee working from home in another state can create withholding and an unemployment insurance account there.
- A federal S election does not bind New York, which requires its own Form CT-6.
- Texas charged franchise tax in loss years, with a no-tax-due threshold of $2.47 million for reports due in 2024 and 2025.
How a state claim arises from presence
Two grounds create state obligations: physical presence and economic presence. Physical presence means people, property or inventory inside the border. Economic presence means enough sales into the state, measured in dollars or transactions. Neither requires an office or a decision.
USA.gov publishes a plain overview of state taxes before you call an agency. The IRS keeps a directory of state government tax sites, which reaches the collecting department rather than a summary of it.
Federal filing status does not decide the state question, and the federal business tax rules separate the layers that stay federal from the ones that do not.
Example: the remote hire in another state
A Texas consultancy approves a work-from-home request from an employee who lives in New York. New York taxes wages for services performed inside the state, so the consultancy owes New York withholding. A 14-day exemption covers nonresident employees whose employer is not domiciled in New York.
The usual sequence: register with New York State, open a withholding account, file Form NYS-45 each quarter. Texas has no income tax withholding, so nothing moves at home. Unemployment insurance is a second registration and starts with the first day worked.
That exemption is narrow. It counts 14 days across the calendar year, not 14 days per quarter.
New York's convenience rule covers the mirror case. If the office sits in New York and the employee moves away, New York still taxes days worked at home. Connecticut, Delaware, Nebraska and Pennsylvania apply similar rules. Most states tax where the work happens.
Where an obligation does land, the state business tax services comparison sets out which providers cover that state.
Where the states agree
Registration follows presence in every state. An employee triggers an unemployment insurance account even in a state with no income tax, such as Texas, Florida or Washington. Payroll, sales and entity registrations stay separate, with their own numbers and calendars.
Where the states split
Economic nexus thresholds are where the states visibly part ways.
| State | Sales tax economic nexus test | Status |
|---|---|---|
| South Dakota | $100,000 in gross sales into the state | 200-transaction test repealed July 1, 2023 |
| Illinois | $100,000 in gross receipts from sales into the state | 200-transaction test repealed January 1, 2025 |
| California | $500,000 in tangible personal property delivered into the state | No transaction test |
| New York | $500,000 in sales and more than 100 transactions in the prior four quarters | Both tests required |
| Texas | $500,000 in total Texas revenue | No transaction test |
South Dakota and Illinois dropped their transaction tests. California and Texas never used one. New York requires both dollars and transactions.
Confirm each number on the state department page for the year you file, because these figures are restated and each page carries its own date.
Where the state return and the federal return part company
A federal S election does not create a state S corporation. New York requires Form CT-6 before it accepts the election. California accepts it and still charges 1.5% of net income, with the $800 minimum. The entity tax treatment article explains why the layers diverge and when to revisit the choice.
A loss year with a state bill
Three taxes apply without profit: Texas franchise tax on margin, Washington's business and occupation tax on gross receipts, and California's $800 minimum franchise tax for corporations and LLCs.
Texas set its no-tax-due threshold at $2.47 million for reports due in 2024 and 2025. California's $800 has stood since 1992, though the statute allows annual adjustment.
What carries into 2027
- Illinois counts dollars alone. Its transaction test ended for periods beginning January 1, 2025, so a 2027 sales tax return uses the $100,000 figure only.
- South Dakota has run on the same basis since July 1, 2023, when its transaction test was repealed.
- New York has kept both tests, and the convenience rule for remote employees remains in force.
- Texas and California thresholds carry forward, subject to restatement, so the page for your filing year governs.
Building the inventory a CPA will ask for
Building the inventory
- List every state where a person works, including one day a week from home.
- List every state where goods ship or a crew performs services.
- List propertyoffices, storage, inventory, equipment.
- List current registrations, by state and by agency, with account numbers.
- Match each state to the taxes it can claimincome, withholding, sales, franchise, gross receipts.
Build Your Own Example
- List people by stateemployees, owners, contractors
- List property by stateoffices, storage, inventory, equipment
- List customers by delivery or service location
- List existing registrations by state
- For each state, list taxes it could claim
- Take the list to a CPA and ask which claims are real
- Keep it with your tax records for examiners
Payments of $600 or more to a contractor in another state require Form 1099-NEC, even when no withholding is due. Keep the finished list with your tax records, dated, so a later year can be checked against it.
