Understanding Sales Tax Nexus for Remote Software Companies

In today's digital-first world, more software companies than ever operate fully remotely—without a physical storefront or office. But even without a brick-and-mortar presence, your software business may still be legally obligated to collect and remit sales tax in various states. This all depends on one critical concept: sales tax nexus.

If you're running a remote software company, understanding how and where you’ve established nexus is essential to avoiding penalties, audits, and missed compliance opportunities.

Let’s explore what nexus means, how it impacts software businesses, and how Manage My Sales Tax can keep your company ahead of compliance risks.

What Is Sales Tax Nexus?

Sales tax nexus is the connection between your business and a state that requires you to collect and remit sales tax there. Once you have nexus in a state, you're legally responsible for registering, charging the correct sales tax on sales, filing returns, and submitting payments.

Remote software companies often assume they’re exempt—but nexus can be established even without a physical location in that state.

Two Types of Nexus Every Remote Software Business Should Know

1. Physical Nexus

Even without an office, your company may create physical nexus through:

• Remote employees or contractors working in a state

• Inventory stored in third-party fulfillment centers (e.g., Amazon FBA)

• Hosting servers or data centers

• Attending trade shows, conferences, or events

• Sales reps or marketing personnel traveling for business

Even one remote worker or rep in a state may be enough to trigger nexus.

2. Economic Nexus

Most states have adopted economic nexus rules since the 2018 South Dakota v. Wayfair decision. This means you can create nexus just by doing business with customers in the state, even if you never set foot there.

Typical thresholds include:

• $100,000 or more in sales, or

• 200 or more separate transactions in a calendar year

Each state sets its own threshold, and many include SaaS, digital software, subscriptions, and downloads in these calculations.

How Nexus Applies to Remote Software Companies

If your company offers:

• Cloud-based SaaS platforms

• Downloadable desktop applications

• Mobile apps

• Software licenses

• Recurring subscription billing

• Remote technical support

  
  

…you may be required to register and collect sales tax in multiple states.

And it gets more complicated—some states tax SaaS (like New York and Texas), while others don’t (like California). Knowing your product taxability is just as important as knowing your nexus footprint.

Common Mistakes Remote Software Businesses Make

• Assuming “no office = no tax liability”

• Delaying registration after economic thresholds are reached

• Failing to monitor where remote employees work from

• Misclassifying products as non-taxable

• Using automation tools without understanding taxability by state

These oversights can lead to back taxes, penalties, interest, and audits—all of which are avoidable with the right approach.

What You Should Be Doing Right Now

1. Conduct a Nexus Study:

   Regularly evaluate where you meet physical or economic nexus thresholds. Update this as your team, product, or revenue grows.

2. Classify Products Correctly:

   Determine how each of your digital offerings is treated in each state—SaaS, licenses, downloads, and support may be taxed differently.

3. Register Proactively:

   Once you meet nexus thresholds, register before you're contacted by the state.

4. Keep Accurate Records:

   Maintain proof of customer locations, transaction counts, and employee locations.

5. Automate with Oversight:

   Use software tools for collection and remittance, but ensure they’re set up by professionals with state-by-state taxability rules in mind.

Understanding Sales Tax Nexus for Remote Software Companies

For remote software companies, understanding sales tax nexus for remote software companies is crucial to staying compliant across different states. Nexus rules can vary widely, and even remote operations or digital sales may create tax obligations. Knowing where and when nexus applies helps your business avoid penalties and manage registrations effectively.

How Manage My Sales Tax Can Help Remote Software Companies

At Manage My Sales Tax, we specialize in helping tech-driven and remote-first businesses like yours understand and manage their multi-state sales tax obligations.

Here’s what we offer:

• Customized Nexus Review to determine where you owe taxes today

• Product Taxability Analysis for your software, SaaS, and digital products

• Registration Support in the correct states, done efficiently

• Sales Tax Filing and Remittance to keep you compliant

• Audit Support and Recordkeeping in case of inquiries from tax authorities

We don’t just help you stay compliant—we help you feel confident in your tax position as you scale.

Stay Compliant, Scale Confidently

Sales tax doesn’t have to slow your growth. With Manage My Sales Tax, you’ll have the guidance and systems you need to stay ahead of the game—even in a remote environment.

👉 Visit our website today to get started with a free consultation. Let us handle the complexity while you focus on building great software.

Secure your FREE consultation now and take control of your sales tax compliance!

👉 https://lisajonescpa.youcanbook.me/