Discovering sales tax nexus can feel overwhelming.
The key is understanding that nexus discovery does not automatically mean you must register or file immediately. The right response is structured, deliberate, and data driven.
This guide outlines the correct steps to take after nexus is identified.
Use this sales tax nexus guide to stay compliant
Step 1: Pause Before Registering or Filing
The most common mistake businesses make is acting too quickly.
Do not:
- Register immediately
- File returns without analysis
- Contact tax authorities prematurely
Nexus establishes obligation. It does not define scope, timing, or risk by itself.
Know what to do next before filing sales tax
Step 2: Confirm When Nexus Was Triggered
The date nexus was triggered matters.
You need to determine:
- When thresholds were crossed
- Whether the trigger was revenue, transactions, or physical presence
- Whether nexus is ongoing or intermittent
Trigger timing defines exposure windows.
Step 3: Identify Affected States
Not all states require the same action.
After nexus discovery:
- List all states where nexus exists
- Separate economic nexus from physical nexus
- Flag marketplace related activity
Each state must be evaluated independently.
Step 4: Quantify Sales Tax Exposure
Exposure is not theoretical.
You should quantify:
- Estimated unpaid sales tax
- Potential penalties and interest
- Materiality by state
Some states may represent high risk while others are negligible.
Step 5: Evaluate Use Tax Exposure Separately
Use tax is often larger than sales tax exposure.
This includes:
- Untaxed software
- Out of state vendors
- Services not charged sales tax
Use tax exposure frequently exists even where sales tax compliance appears clean.
Step 6: Prioritize States Based on Risk
Not all states require immediate action.
Prioritization should consider:
- Exposure size
- Audit aggressiveness
- Lookback periods
- Business activity trend
This prevents unnecessary filings and rushed decisions.
Step 7: Decide Whether Voluntary Disclosure Is Needed
Some situations warrant voluntary disclosure.
This depends on:
- Length of exposure
- Amount of liability
- State specific programs
Voluntary disclosure can reduce penalties and limit lookback periods when used correctly.
Step 8: Choose Your Filing Strategy
Filing is a choice, not a default.
Options include:
- Filing internally
- Working with a CPA or advisor
- Using third party filing services
- Using a compliance platform
Different states can use different approaches.
Step 9: Register Only When Ready
Registration starts the clock.
Once registered:
- Filing obligations begin
- Deadlines are enforced
- Late penalties can apply
Registration should follow analysis, not precede it.
Step 10: Implement Ongoing Monitoring
After cleanup:
- Monitor thresholds continuously
- Track new states
- Review product and service taxability regularly
Nexus management is ongoing, not one time.
What Not To Do
Avoid these common mistakes:
- Registering everywhere at once
- Filing without understanding exposure
- Assuming marketplace collection solves everything
- Ignoring use tax
- Treating nexus as a one time problem
These errors increase cost and risk.
Why Businesses Get This Wrong
Businesses get this wrong because:
- Legacy tools focus on filing, not exposure
- Growth outpaces compliance processes
- Data is fragmented across systems
Clarity must come before action.
Understand your sales tax exposure before it becomes a risk
Final Thought
Discovering sales tax nexus is not a failure.
It is a signal that your business has grown.
The right response is informed planning, not panic. When nexus is handled methodically, businesses regain control and reduce long term risk.
