State Tax Thresholds

Common Thresholds Summary

$500,000 Revenue Threshold:

• California, Texas, Washington, Massachusetts, Maryland, New York (+ 100 txns)

$100,000 Revenue Threshold (Most Common):

• 40+ states use this threshold
• Many also require 200+ transactions (varies by state)

No Economic Nexus:

• Florida (physical presence only)
• Montana (no sales tax)
• Oregon (no sales tax)
• New Hampshire (no sales tax)
• Delaware (no sales tax)

Sales Tax Economic Nexus - All 50 States

Alabama

• Revenue: $250,000
• Transactions: None required
• Effective Date: October 1, 2018
• Notes: One of the lower thresholds

Alaska

• No statewide sales tax
• Notes: Some local jurisdictions have sales tax

Arizona

• Revenue: $100,000
• Transactions: None required (revenue only)
• Effective Date: October 1, 2019

Arkansas

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold triggers)
• Effective Date: July 1, 2019

California

• Revenue: $500,000
• Transactions: None required
• Effective Date: April 1, 2019
• Notes: Higher threshold than most states

Colorado

• Revenue: $100,000
• Transactions: None required
• Effective Date: December 1, 2018

Connecticut

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: AND (both required)
• Effective Date: December 1, 2018

Delaware

• No sales tax

Florida

• No economic nexus
• Physical presence required
• Notes: One of few states without economic nexus

Georgia

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: January 1, 2019

Hawaii

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: July 1, 2018

Idaho

• Revenue: $100,000
• Transactions: None required
• Effective Date: June 1, 2019

Illinois

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: AND (both required)
• Effective Date: October 1, 2018

Indiana

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: October 1, 2018

Iowa

• Revenue: $100,000
• Transactions: None required
• Effective Date: January 1, 2019

Kansas

• Revenue: $100,000
• Transactions: None required
• Effective Date: October 1, 2019

Kentucky

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: October 1, 2018

Louisiana

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: July 1, 2020

Maine

• Revenue: $100,000
• Transactions: None required
• Effective Date: July 1, 2018

Maryland

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: October 1, 2018
• 2019 Update: Changed to $100,000 from prior threshold

Massachusetts

• Revenue: $100,000
• Transactions: None required
• Effective Date: October 1, 2019
• Notes: Previously had cookie nexus rules

Michigan

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: October 1, 2018

Minnesota

• Revenue: $100,000
• Transactions: 200 transactions (retail sales)
• Combined: OR (either threshold)
• Effective Date: October 1, 2018

Mississippi

• Revenue: $250,000
• Transactions: None required
• Effective Date: September 1, 2018

Missouri

• Revenue: $100,000
• Transactions: None required
• Effective Date: January 1, 2023

Montana

• No sales tax

Nebraska

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: January 1, 2019

Nevada

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: October 1, 2018

New Hampshire

• No sales tax

New Jersey

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: November 1, 2018

New Mexico

• Revenue: $100,000
• Transactions: None required
• Effective Date: July 1, 2019

New York

• Revenue: $500,000
• Transactions: 100 transactions
• Combined: AND (both required)
• Effective Date: June 21, 2018
• Notes: Higher revenue threshold but lower transaction count

North Carolina

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: November 1, 2018

North Dakota

• Revenue: $100,000
• Transactions: None required
• Effective Date: October 1, 2018

Ohio

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: August 1, 2019

Oklahoma

• Revenue: $100,000
• Transactions: None required
• Effective Date: November 1, 2019

Oregon

• No sales tax

Pennsylvania

• Revenue: $100,000
• Transactions: None required
• Effective Date: July 1, 2019

Rhode Island

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: July 1, 2019

South Carolina

• Revenue: $100,000
• Transactions: None required
• Effective Date: November 1, 2018

South Dakota

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: November 1, 2018
• Notes: The Wayfair case originated from this state

Tennessee

• Revenue: $100,000
• Transactions: None required
• Effective Date: October 1, 2019

Texas

• Revenue: $500,000
• Transactions: None required
• Effective Date: October 1, 2019
• Notes: Higher threshold than most states

Utah

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: January 1, 2019

Vermont

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: July 1, 2018

Virginia

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: July 1, 2019

Washington

• Revenue: $100,000
• Transactions: None required
• Effective Date: October 1, 2018

West Virginia

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: January 1, 2019

Wisconsin

• Revenue: $100,000
• Transactions: None required
• Effective Date: October 1, 2018

Wyoming

• Revenue: $100,000
• Transactions: 200 transactions
• Combined: OR (either threshold)
• Effective Date: February 1, 2019

Income Tax Nexus & P.L. 86-272

Public Law 86-272 Overview

Protection Applies When:

• Only activity is solicitation of orders for tangible personal property
• Orders are approved and filled outside the state
• No other business activities in the state

Protection Does NOT Apply To:

• Services (e.g., software as a service)
• Intangible goods
• Selling products AND providing services
• Having employees perform non-solicitation activities
• Maintaining inventory in the state

States with Factor Presence Nexus

California:

• $500,000+ sales (property + payroll + sales)
• $50,000+ property
• $50,000+ payroll
• 25% of total sales

New York:

• No factor presence statute (physical presence required)

Texas:

• See Franchise Tax section

Other States:

• Most states rely on physical presence for income tax
• P.L. 86-272 provides protection for many out-of-state sellers

Franchise Tax Thresholds

Texas Franchise Tax (Margin Tax)

Revenue Threshold: $1,230,000 (2024)

• Below this = no franchise tax due
• Above this = subject to margin tax

Tax Rates:

• Retail/Wholesale: 0.375%
• Other businesses: 0.75%

Calculation Base:

• Total revenue minus either:
  • Cost of goods sold (COGS)
  • Compensation
  • 30% of total revenue (standard deduction)
  • $1 million deduction

Delaware Franchise Tax

Based on authorized shares:

• Minimum: $175
• Maximum: $200,000

Other States

Most states don't have separate franchise taxes. Check state-specific rules for:

• Annual report fees
• Minimum taxes
• Entity-level taxes

Alert Severity Guidelines

Use these guidelines when generating alerts:

RED (Critical) - Immediate Action Required

• Revenue exceeds threshold by 20%+ OR
• Both revenue AND transaction thresholds met (for AND states) OR
• Already operating in state without registration

ORANGE (Warning) - Review Recommended

• Revenue at 80-120% of threshold OR
• One threshold met but not both (for AND states) OR
• P.L. 86-272 judgment required (services + goods)

YELLOW (Info) - Monitor Situation

• Revenue at 60-80% of threshold OR
• Trending toward threshold (analyze historical data) OR
• Recent state law change affecting nexus

Validation Examples

California Sales Tax

// Correct implementation
if (stateRevenue['CA'] >= 500000) {
  createAlert({
    state: 'CA',
    type: 'SALES_NEXUS',
    subtype: 'ECONOMIC_NEXUS',
    severity: 'RED',
    threshold: 500000,
    currentAmount: stateRevenue['CA'],
    message: 'California sales tax economic nexus triggered'
  });
}

New York Sales Tax (AND logic)

// Correct - BOTH thresholds required
if (stateRevenue['NY'] >= 500000 && transactionCount['NY'] >= 100) {
  createAlert({
    state: 'NY',
    type: 'SALES_NEXUS',
    subtype: 'ECONOMIC_NEXUS',
    severity: 'RED',
    threshold: 500000,
    currentAmount: stateRevenue['NY'],
    message: 'New York sales tax nexus - both revenue and transaction thresholds met'
  });
}

Texas Franchise Tax

// Correct threshold for 2024
if (totalRevenue >= 1230000) {
  createAlert({
    state: 'TX',
    type: 'FRANCHISE_TAX',
    severity: 'RED',
    threshold: 1230000,
    currentAmount: totalRevenue,
    message: 'Texas franchise tax threshold exceeded'
  });
}

Maintenance Notes

Update Frequency: Review quarterly (January, April, July, October)

Sources to Check:

• State department of revenue websites
• Tax Foundation updates
• Bloomberg Tax
• State tax policy changes

Recent Changes:

• January 2024: TX franchise tax threshold increased to $1,230,000
• July 2023: MO economic nexus enacted ($100,000)

States to Watch:

• Florida (may enact economic nexus)
• States changing transaction count requirements

Common Mistakes to Avoid

1. Using OR logic for AND states

   • NY requires BOTH $500k revenue AND 100 transactions
   • IL requires BOTH $100k revenue AND 200 transactions
   • CT requires BOTH $100k revenue AND 200 transactions

2. Forgetting no-sales-tax states

   • AK, DE, MT, NH, OR have no statewide sales tax
   • Don't generate alerts for these states

3. Outdated thresholds

   • Always check this Skill for current amounts
   • Don't hardcode thresholds from old references

4. Applying P.L. 86-272 to services

   • Protection only for tangible goods
   • SaaS, consulting, etc. are NOT protected

5. Ignoring measurement period

   • Most states measure on rolling 12-month or calendar year basis
   • Check state-specific lookback periods

References

• South Dakota v. Wayfair (2018): Supreme Court case enabling economic nexus
• P.L. 86-272 (1959): Federal law limiting state taxation of interstate commerce
• Streamlined Sales Tax: Multi-state initiative for sales tax simplification

When using this Skill:

1. Always verify the current date matches "Last Updated" above
2. If more than 3 months old, check for state law changes
3. Cite specific thresholds when reviewing code
4. Generate alerts using severity guidelines above