Summary of What This Blog Covers
- Nexus Defined: State tax nexus means your business has enough presence in a state to owe taxes often triggered by remote employees.
- Remote Team Risk: Just one out-of-state employee can create tax filing obligations, even with no sales in that state.
- What’s at Stake: Ignoring nexus can lead to penalties, interest, audits, and personal liability.
- How to Avoid It: Run annual nexus reviews, register early, fix payroll setups, and partner with a proactive CPA.
You’re growing fast. The team is remote, the sales are scaling, and the vibe is pure entrepreneurial freedom. You’ve got talent in San Diego, support in Ohio, a developer coding away in Colorado, and your HQ—comfortably anchored in Austin, Texas.
And then it happens: you get a letter from a state you’ve never done business in, demanding taxes you didn’t know you owed. Not a courtesy reminder. A bill. With penalties. And interest. And a deadline.
What you’ve just encountered is a classic tax plot twist known as state tax nexus and if you’ve got a remote team, chances are good you’ve triggered it without ever knowing.
In this deep dive, we’re pulling back the curtain on what state nexus really is, why remote employees are red flags to state tax agencies, and how smart business owners like you can take back control before things get expensive.
Let’s Define It: What Is State Tax Nexus?
Nexus isn’t a tech term. It’s not a new platform. It’s an old legal principle with modern consequences.
State tax nexus is a legal term meaning “sufficient presence.” In tax law, if your business has enough presence in a state (physical, economic, or operational), that state has the legal right to tax you.
That means you may need to:
- File income or franchise tax returns
- Register for payroll tax and unemployment insurance
- Collect and remit sales tax
- Comply with state-specific business laws
It’s not about how big your business is. It’s about where it’s operating even through a laptop in a living room hundreds of miles from your headquarters.
Nexus laws vary by state. But the triggers are fairly consistent:
- Employees working from home in another state
- Independent contractors doing regular work for your business
- Inventory stored in third-party warehouses (think Amazon FBA)
- Sales thresholds in specific states (economic nexus)
- Services performed within a state, even temporarily
- Office spaces, even if leased temporarily or used by a single employee
So, what does this mean for remote teams? A lot.
Remote Teams: Why They’re the Perfect Storm for Nexus Risk
Here’s the hard truth: in most states, a single remote employee can trigger nexus even if they’re not in sales, and even if you’re not making revenue in that state.
Yes, really.
Most business owners assume that if they’re not selling to customers in a state, they have no tax obligation there. That assumption used to be safer back when employees all sat in the same office. But in the post-pandemic business landscape, where remote work is the norm and talent acquisition is borderless, the tax codes have not kept up.
Instead, they’ve gotten more aggressive.
Why? Because state budgets are hurting, and out-of-state businesses with local employees are easy pickings for revenue. State tax authorities have become increasingly sophisticated at identifying unregistered businesses operating within their borders.
They cross-reference:
- Payroll data from major providers like Gusto or ADP
- Employer registrations with state labor departments
- IRS forms (W-2s and 1099s)
- State unemployment filings
- Franchise tax databases
The moment your remote employee gets a W-2 or files for unemployment? You’re on the radar.
Nexus by the Numbers: It Doesn’t Take Much
Let’s take a look at a few examples of nexus thresholds:
- California: Just one employee, even working remotely, triggers nexus. Period.
- Texas: Nexus can be triggered by economic thresholds—$500,000 or more in gross receipts.
- New York: One employee working from home could result in both income and franchise tax filings.
- Colorado and Washington: Physical presence by employees absolutely establishes nexus even if there are no customers or sales.
What this means is that your company, even if it operates solely online, could owe taxes in multiple states simply because of where your employees live.
What Happens If You Ignore It?
Ignoring nexus obligations doesn’t make them go away. In fact, it makes them worse.
When you fail to file required returns in a state where you have nexus:
- The statute of limitations never starts. That means the state can audit you forever.
- Penalties accrue monthly. Some states tack on interest rates as high as 18% per year.
- You may lose out on voluntary disclosure or amnesty options.
- You could trigger corporate officer liability—meaning you personally could be on the hook.
- You risk suspension of your right to do business in that state.
It’s not a “wait and see” situation. It’s a “fix it before it breaks you” situation.
FBAR and the International Angle
What if your business has international elements: foreign bank accounts, foreign contractors, or remote employees handling overseas funds?
You may need to file an FBAR (Foreign Bank Account Report) if your business or personal accounts exceed $10,000 in foreign banks at any point during the year. If your remote team is accessing or managing those funds, even indirectly, that can complicate your reporting obligations.
Noncompliance here is brutal. FBAR penalties can run $10,000 per account per year and for willful violations? They can hit 50% of the account balance.
This is where you want an enrolled agent or certified CPA near you with experience navigating both domestic and international tax.
What You Can and Should Do Right Now
Step 1: Run a Full Nexus Review
You need a map. A full, customized review of where your business has presence, where your team lives, and where your obligations lie.
At Insogna CPA, we conduct annual nexus evaluations that reveal:
- States where you have triggered nexus
- States where you’re approaching economic thresholds
- Registration and filing obligations
- Risk exposure based on employee locations
This is not a one-size-fits-all checklist. It’s a detailed compliance roadmap.
Step 2: Register Where You Have Nexus
Stop waiting. Be proactive. Register your business in every state where you have nexus. It doesn’t mean you’ll owe taxes in every state but it does mean you’re playing by the rules and avoiding penalties.
We help clients file registrations, set up payroll tax accounts, and keep their filings current so they don’t lose sleep over it.
Step 3: Fix Payroll Now
If your payroll provider hasn’t registered you in all the right states, you’re still liable. We’ll help audit your payroll system, correct state setups, and ensure the proper withholdings and remittances are being made.
Step 4: Strategize for Growth
Thinking of hiring in a new state? Run the numbers first. Some states have high tax burdens, others have low. Some require unitary filings. Some hit you with gross receipts taxes regardless of income.
With our help, you can structure hiring, expansion, and compensation strategies that minimize tax exposure while maximizing growth.
Why Insogna CPA?
We’re not just any Austin tax accountant. We’re the strategic growth partners for businesses that play to win.
When you work with Insogna CPA, you get:
- Proactive planning instead of last-minute scrambling
- Deep knowledge of state tax nexus, payroll law, and franchise tax rules
- Concierge-level support and clear, plain-English communication
- A team that sees around corners, anticipates risks, and keeps you protected
Whether you’re Googling “tax preparation services near me” or need elite-level Austin accounting services, we’ve got your back and your books.
One Final Word to the Wise
If you’re hiring remotely, selling across state lines, or scaling up faster than your tax infrastructure can handle, it’s time to get serious about nexus.
Taxes don’t have to be scary. They just have to be understood. And once you understand the rules, you don’t just avoid penalties, you make smarter moves. Strategic moves. Moves that free you up to focus on the things only you can do: lead your business and shape your future.
Let Insogna CPA take care of the complexity. We’ll make it simple, smart, and seamless so you can keep building without looking over your shoulder.
Book Your Nexus Strategy Session Now
Stop wondering. Start knowing. Let us show you exactly where you stand and what to do next. Whether you need a CPA firm in Austin, a certified professional accountant near me, or a team that transforms tax into strategy, we’re ready when you are.
Let’s make taxes a business advantage not a liability.