Quick answer: A New York business that sells into other states can owe sales tax, income or franchise tax, or both in those states once it has "nexus," a sufficient connection that can come from physical presence, employees, property, or simply exceeding a state's sales threshold. Since the 2018 Wayfair decision, most states require remote sellers to collect sales tax once they pass an economic threshold. Income tax nexus follows different rules, and each state then decides what share of your income it can tax through apportionment.
Plenty of Syracuse-area businesses grow beyond New York without noticing the tax consequences. An online store starts shipping nationwide. A manufacturer lands a customer in Ohio. A service firm hires a remote employee in Florida. Each of those can create filing obligations in another state, and states have become very good at finding businesses that should be filing.
What nexus means
Nexus is the threshold connection that allows a state to require you to collect its taxes or pay them. It is determined state by state and tax by tax, so you can have sales tax nexus in a state without income tax nexus, or the reverse.
Common ways a New York business creates nexus elsewhere:
- Employees working in the state, including remote employees working from home.
- Inventory stored in the state, including in a third-party fulfillment warehouse.
- Offices, equipment, or property located there.
- Sales representatives or installers traveling into the state regularly.
- Sales into the state above that state's economic threshold.
Sales tax: economic nexus after Wayfair
Before 2018, a state generally could not require an out-of-state seller with no physical presence to collect its sales tax. The Supreme Court's decision in South Dakota v. Wayfair changed that. Today nearly every state with a sales tax has an economic nexus rule: once your sales into the state exceed a dollar amount, and in some states a number of transactions, during a measuring period, you must register and collect.
The thresholds, measuring periods, and what counts toward them differ by state and change from time to time, so check each state's revenue department directly. A few practical points:
- Marketplace sales through platforms like Amazon or Etsy are generally collected by the marketplace, but some states still count them toward your threshold.
- Taxability differs. A product taxable in New York may be exempt elsewhere, and vice versa, and services are taxed very unevenly from state to state.
- Exemption certificates from wholesale or exempt customers need to be collected and kept for each state.
New York applies its own economic nexus rule to out-of-state sellers coming the other way. Our article on New York sales tax for small businesses covers the home-state side.
Income and franchise tax nexus
Income tax nexus is a separate question. Many states now use economic nexus for income or franchise taxes too, often based on receipts from customers in the state. Some states impose gross receipts taxes instead of, or in addition to, an income tax, and those often have low thresholds.
There is one important federal protection. Public Law 86-272 generally prevents a state from imposing a net income tax on a business whose only activity in the state is soliciting orders for tangible personal property that are approved and shipped from outside the state. It does not protect sellers of services or digital products, it does not apply to sales taxes or gross receipts taxes, and some states have taken an increasingly narrow view of what activities are protected, particularly for internet-based interactions with customers.
For pass-through businesses, nexus in another state usually means a partnership or S corporation return in that state, and often nonresident returns or composite filings for the owners.
Apportionment and avoiding double tax
Once you have income tax nexus in more than one state, each state taxes a share of your income using an apportionment formula. Many states, including New York for corporations, now rely mainly or entirely on a single sales factor that compares sales to customers in the state with total sales. Rules for where a sale of a service is sourced vary, which can lead to the same dollar being claimed by two states or by none.
For individual owners who are New York residents, New York generally taxes all of your income but allows a resident credit for tax paid to other states on income sourced there, subject to limits. Getting the sourcing consistent across returns is what keeps that credit working properly.
A practical approach to staying compliant
We suggest an annual review rather than waiting for a notice:
- Map your footprint. List every state where you have employees, contractors, property, inventory, or regular travel.
- Pull sales by state. Run a report of sales by ship-to or customer state for the past year.
- Compare to thresholds. Check each state's current sales tax and income tax thresholds against those numbers.
- Register before you collect. Do not charge a state's sales tax without registering first.
- Fix the past carefully. If you discover you should have been filing, many states offer voluntary disclosure agreements that limit how many years back you have to go and may reduce penalties.
Frequently asked questions
Does one remote employee in another state create nexus?
Very often, yes. An employee working in a state is usually enough for income tax nexus and payroll withholding obligations there, and may create sales tax nexus too. Hiring remotely is a good reason to check that state's rules before the first paycheck.
We only sell online and ship from Syracuse. Do we owe sales tax elsewhere?
Possibly. Under economic nexus rules, physical presence is no longer required. Once your sales into a state pass its threshold, you generally must register and collect there, even if everything ships from New York.
What if we never collected tax from customers in another state?
The liability generally falls on you, not the customer, once you were required to collect. A voluntary disclosure agreement is often the cleanest way to resolve past exposure. It helps to address it before the state contacts you.
Does attending a trade show in another state create nexus?
A short trade show visit usually does not by itself, and some states have specific exceptions for it. Taking orders, making deliveries, or keeping inventory there can change the answer, so check the particular state's rules.
This article is general information for 2026, not tax or legal advice for your situation. Tax rules and figures change; confirm current amounts with the IRS, New York State, or your accountant before acting.
Related service: Business & Corporate Tax