Multi-State – Navigating State Sales Tax

Growing security businesses that venture beyond their state borders are faced with complicated rules for charging taxes on goods and services

Ever since the Supreme Court ruled that physical presence in a state is no longer the sole requisite for sales tax collection (South Dakota v. Wayfair Inc., June 21, 2018), questions about sales tax collection –and remitting – have multiplied. While most states provide an exception for small sellers, the problem with these exceptions is that they vary widely and that it is not clear who must collect sales taxes on which sales – or pay a “use” tax on their own purchases.

Prior to the Supreme Court ruling, states could only tax sales by businesses with a physical presence in the state. The Wayfair case changed that long-standing rule, as the court found the respondents “economic and virtual contacts” with South Dakota to be a sufficient basis for a tax collection obligation (nexus).

For economic nexus, a security business establishes an obligation to collect and remit sales and use tax by its economic activity in a state. Economic nexus is expected to soon be in effect in 27 states; unfortunately, determining when economic nexus has been established in a state is, once again, complicated – because there is little uniformity between jurisdictions.


MAY 16, 2019