Your Clients Have a Sales Tax Problem and Don't Know It Yet

Over the years, I've talked to a lot of businesses that found out they had a sales tax problem the hard way. A notice arrives from a state they've never registered in. They've been selling online for two or three years, things have been going well, and then suddenly they're looking at back taxes, penalties, and interest in a jurisdiction they've never thought about once.

The first thing they ask is: how did this happen?

It happened gradually. It happened quietly. And in most cases, nobody in their corner had raised the question before it became a crisis.

That's the call I want accounting firms to start making now, before the notice arrives.

What changed after Wayfair

For a long time, the rules around sales tax were manageable. Businesses collected and remitted where they had physical presence. No office, no warehouse, no employees in a state? That state generally couldn't require you to collect there.

That changed in 2018. The Supreme Court ruled in South Dakota v. Wayfair, and physical presence stopped being the standard. States could now require businesses to collect and remit based on economic activity alone. Sell enough into a state, and you have an obligation there, whether you've ever set foot in it or not.

Most states moved fast. The typical threshold: $100,000 in annual sales into a state, often paired with a 200-transaction count. That might sound like a high bar. But for a growing e-commerce seller, a software company adding customers across the country, or a service business with clients in multiple states, those numbers get crossed before anyone is paying attention.

How exposure builds without anyone noticing

Sales tax exposure doesn't come with a warning. It builds in the background while your client is focused on running their business.

A retailer starts selling through a new online marketplace. A software company picks up a handful of new customers in states they weren't operating in before. A firm hires a remote employee in a new state. Any of those can create a nexus obligation. None of them trigger an automatic alert.

By the time it surfaces through an audit or a state inquiry, the liability can be significant. And the client's first question is going to be why nobody flagged this sooner.

The rules keep changing

Post-Wayfair complexity is one problem. The landscape itself is another.

States update nexus thresholds. Product taxability rules change. What's exempt in one state is fully taxable in another. Marketplace facilitator laws have shifted who's responsible for collection in a lot of transactions. Tax compliance providers track hundreds of rate changes across U.S. jurisdictions every year, and that's before you factor in the broader churn in taxability rules and filing requirements.

Tracking all of that manually isn't realistic for most businesses. It's not something they should be expected to do on their own.

Why accounting firms are the right people to raise this

Your clients trust you with the financial questions they can't navigate themselves. Sales tax fits squarely in that category, and most of them have no real sense of how much exposure they're sitting on.

The firms doing this well aren't waiting for clients to ask. They're proactively asking about multi-state sales activity, where clients have remote employees, and whether anyone has ever done a nexus review. They're catching problems early and building advisory relationships that go well beyond annual filings.

For most of your clients, the question isn't whether there's sales tax exposure. It's how much there is and how long it's been building. The sooner you start that conversation, the better the outcome for everyone.

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