Growth is something every SaaS company is working toward. More customers, more recurring revenue, more states. But here’s something that doesn’t always make it onto the radar as the business scales: your nexus footprint grows right alongside your customer base.
We talk to SaaS finance leaders regularly who are surprised to discover they have sales tax obligations in states they’ve never given a second thought to. Not because they’ve been careless, but because the rules have changed significantly over the past several years and the triggers aren’t always obvious. This is particularly true for SaaS businesses, where there’s often no warehouse, no storefront, and sometimes no employees outside of a home state.
If your company has been growing and you haven’t recently taken stock of where you might have nexus, 2026 is a good time to do it. State enforcement activity around digital services has increased, and the cost of being caught off-guard is considerably higher than the cost of getting ahead of it.
This article is designed to help you think through your own situation: what to look at, where the SaaS-specific blind spots tend to be, and what to do if you think you might have exposure you haven’t addressed.
Key Takeaways
- Economic nexus means your revenue alone can create sales tax obligations in states where you have no physical presence
- Remote employees and contractors can independently trigger nexus in states where they work, regardless of your revenue there
- States treat sales tax on SaaS products differently: having nexus does not always mean you owe tax on your specific product
- If you suspect unaddressed nexus exposure, a formal review before registering is the recommended first step
CTA: Sales tax obligations don’t wait for a convenient moment to surface. Talk to us today about where your company stands. Contact Miles Consulting Group
Sales Tax is the Responsibility of the Seller, and that Includes You
This is the part that often surprises founders and finance leaders who are newer to multi-state sales tax compliance. Sales tax isn’t a cost your customers bear independently, it’s a tax you are required to collect on their behalf and remit to the state. If you don’t collect it, the liability doesn’t go away. It stays with you.
Before the Supreme Court’s 2018 South Dakota v. Wayfair ruling, you generally needed a physical presence in a state to have an obligation there. That’s no longer the case. Economic nexus is now the standard across virtually every state that has a sales tax, meaning your revenue volume alone can create an obligation: no office, no employees, no physical footprint required.
For SaaS companies selling to customers across the country, this means your potential exposure is wider than many realize, and it grows as your business grows.
The SaaS-Specific Nexus Triggers That Catch Companies Off Guard
For a product-based business, nexus triggers are relatively intuitive: a warehouse, an employee in a new state, trade show attendance, for example. For SaaS companies, the triggers can be less obvious. Here are the ones we see catch growing companies by surprise most often.
Crossing an economic nexus threshold mid-year. Most SaaS companies are aware that economic nexus thresholds exist, but it’s easy to lose track of exactly when you cross one, particularly if you’re growing quickly.
In most states the threshold is $100,000 in annual sales, though some larger states like California, New York, and Texas sit at $500,000. Once you cross a threshold, your obligation begins. If nobody is actively monitoring that, you can end up with quarters of uncollected tax before anyone notices. For a full breakdown of thresholds by state, our State Nexus Cheat Sheet for SaaS is a useful reference.
Remote employees creating physical presence nexus. This one has become far more common as remote work has normalized. If you have a developer, a customer success manager, or a sales rep working from their home in another state, that can be enough to establish physical presence nexus there, regardless of your revenue in that state. It’s one of the most frequent ways we see SaaS companies accumulate obligations they weren’t expecting.
Third-party contractors and service providers. Engaging contractors who perform work on your behalf in a state, even for a limited time, can also create nexus. This is worth reviewing if you use external implementation partners, white-glove onboarding teams, or other service providers who operate across state lines.
How states treat sales tax on SaaS revenue varies considerably. Not all states impose sales tax on SaaS subscriptions, and those that do don’t always apply it in the same way.
Some states treat access to software as taxable data processing. Others classify it as an information service, which may be exempt. Some states exempt SaaS subscriptions used for manufacturing or R&D purposes. These variations mean that simply knowing you have nexus in a state isn’t enough, you also need to know whether sales tax applies to your specific product in that state and at what rate. Our interactive SaaS Sales Tax by State map gives you a state-by-state picture of how sales tax applies to SaaS revenue streams across the country.
Bundled services. If your SaaS product is sold alongside professional services, implementation, or support in a single contract or invoice, how you bundle and price those elements can affect whether sales tax applies. Some states will tax the entire bundle if a taxable component is included. Others allow you to separate taxable from non-taxable items, but only if your invoicing supports that distinction.
CTA: Any of these scenarios sound familiar? It’s time to get a clear picture of your exposure. We can help. Get in touch with our team to discuss a nexus review.
How to Read Your Own Exposure
Before you can determine what to do next, it helps to take stock of where you currently stand. Here are the key things to look at internally.
Where are your customers located, and how much revenue are you generating in each state? Your billing system should be able to give you this picture. Run a report by state and compare it against the economic nexus thresholds. If you’re close to or over the threshold in states where you’re not currently registered and collecting, this requires further investigation.
Where do your employees work? Not just at your headquarters, but every remote employee, contractor, or freelancer who regularly performs work on your behalf. Map that out by state and factor it into your nexus analysis alongside your revenue data.
When did your obligations begin? This is the question most companies find uncomfortable, because the answer is often “earlier than we thought.” Most states require you to indicate on your registration form exactly when nexus was created and that date determines how far back your filing obligations go. This is why a proper nexus review matters: it gives you a defensible, documented answer to that question.
What’s Changed in 2026 That SaaS Companies Should Factor In
The nexus rules themselves are largely settled now with both physical and economic nexus being the standard across the board. But a few developments are worth keeping on your radar as you assess your current position.
Several states have updated or expanded their definitions of taxable digital services in the past 12 to 18 months, with some now explicitly capturing categories of SaaS revenue that were previously in a gray area. Washington’s expansion of its retail sales tax to cover additional digital services categories is a notable example, as is Illinois: effective January 1, 2026, the state eliminated its 200-transaction threshold entirely, meaning economic nexus is now triggered solely by $100,000 in Illinois sales. And for SaaS companies with customers in Chicago specifically, the city’s Personal Property Lease Transaction Tax on software use increased to 15% from the start of 2026. We’ve covered both updates in detail in our Illinois and Chicago 2026 update.
If your product has evolved new features, new delivery mechanisms or new service categories, whether sales tax applies to your revenue in certain states may have changed even if your nexus situation hasn’t.
Trailing nexus is also worth understanding if you’ve recently scaled back operations in any state or dipped below a threshold. Several states require you to continue filing for a period after nexus-creating activities cease, even if you no longer meet the threshold. California, for example, requires continued registration through the calendar year in which nexus occurred and the following year. We’ve written in more detail about this in our article on trailing nexus.
What to Do If You Think You Have Nexus You Haven’t Addressed
The most important thing is not to simply register and start collecting without understanding the full picture first. Most states require you to declare on your registration form when nexus was created. If that was two or three years ago, the state may expect back taxes, interest, and potentially penalties going back to that date. Registering without addressing prior periods doesn’t resolve the exposure, it can actually draw attention to it.
The right first step is a formal nexus review, which gives you a clear, documented picture of where your obligations lie, when they began, and what your exposure looks like. From there, options like Voluntary Disclosure Agreements are often available to resolve prior periods on more favorable terms, in many cases waiving penalties entirely for companies that come forward proactively. The Streamlined Sales Tax Governing Board also offers a centralized registration system that can simplify the process for companies with obligations in multiple member states.
Not sure if this applies to you? Run through this quick checklist.
- We know exactly which states we have nexus in, based on a formal review completed within the last 12 months
- We are actively monitoring our revenue by state and have a process in place to identify when we approach or cross an economic nexus threshold
- We have accounted for all remote employees and third-party contractors when assessing our physical presence nexus obligations
If you couldn’t check every box, don’t put it off. Talk to us today.
For a growing SaaS business, sales tax obligations arise wherever your customers are and in 2026, that means most companies selling nationally have obligations in more states than they’re currently managing.
The good news is that getting on top of this is very manageable when you approach it proactively.
At Miles Consulting Group, nexus determination and review is one of the core things we do. Our team has over 24 years of experience helping SaaS and technology companies understand exactly where they stand and what to do about it. We offer a free 30-minute consultation to talk through your situation and help you figure out the right next steps. Reach us at info@milesconsultinggroup.com or book a call.
Frequently Asked Questions
Does my SaaS company have sales tax obligations if I don’t have any offices outside my home state? Quite possibly, yes. Since the 2018 Wayfair decision, physical presence is no longer required to create a sales tax obligation. If your revenue or transaction volume exceeds a state’s economic nexus threshold, you have an obligation there, regardless of where your office is located. Remote employees can also create physical presence nexus independently of revenue thresholds.
How do I know which states I have nexus in? Start by pulling a revenue report by state from your billing system and comparing it against economic nexus thresholds. For a quick state-by-state reference, our State Nexus Cheat Sheet for SaaS is a helpful starting point. For a definitive, defensible answer, a formal nexus review is the right approach.
Does sales tax apply to my SaaS product in every state where I have nexus? Not necessarily. States vary considerably in how they treat sales tax on SaaS revenue. Some impose sales tax on SaaS subscriptions fully, some partially, some not at all. Having nexus in a state means you have a filing obligation there, but whether you are required to collect sales tax depends on how your specific product is classified in that state. Our SaaS Sales Tax by State map gives a useful overview of how sales tax applies to SaaS revenue streams across the country.
Can I just register and start collecting tax going forward, without worrying about prior periods? Unfortunately it’s not quite that straightforward. Most states require you to indicate when nexus was created on your registration form. If that was two or three years ago, the state may expect back taxes from that date. A nexus review helps you understand the full scope before you register, and options like Voluntary Disclosure Agreements can help resolve prior periods proactively on more favorable terms.
What is trailing nexus and does it apply to my company? Trailing nexus refers to the obligation to continue filing in a state for a period after you no longer meet the nexus threshold. Not all states have trailing nexus rules, and for those that do, the duration varies.
What’s the first step if we think we have unresolved nexus exposure? A nexus review. It gives you a clear picture of where your obligations lie, when they began, and what your exposure looks like, which is the foundation for everything that comes next. Get in touch and we can walk you through the process.
Can remote employees create sales tax nexus for my SaaS company? Yes. If you have employees working remotely from another state, even from a home office, that can be enough to establish physical presence nexus there. This applies regardless of whether your revenue in that state meets the economic nexus threshold. It’s one of the most common ways SaaS companies unknowingly create obligations in states they haven’t considered.
