1. Find Where Online Sales Create Tax Obligations
A sale delivered across a state line can trigger different tax obligations depending on the destination. In South Dakota v. Wayfair, Inc. (2018), the Supreme Court rejected a constitutional rule requiring physical presence. States still set their own registration and collection criteria within constitutional limits. Start with the seller's activities and destination sales.
Compare Physical and Economic Nexus
Local operations may trigger registration below remote-sales thresholds. Economic nexus instead measures sales delivered into the destination state.
- Map employees, offices, inventory, and other in-state business activities.
- Calculate receipts and transaction counts for each destination state.
- Check each state's measurement period rather than applying one national threshold.
Apply the Remote-Seller Threshold Correctly
Tax Law § 1101(b)(8)(iv) sets a presumption of regular solicitation when both thresholds are exceeded in the preceding four sales tax quarters.
| Factor | Relevant Test |
|---|---|
| Gross receipts | More than $500,000 in tangible personal property sales delivered into the state |
| Transactions | More than 100 such sales in the same period |
| Other connections | Physical activities may independently create registration duties |
Gross receipts
- Relevant TestMore than $500,000 in tangible personal property sales delivered into the state
Transactions
- Relevant TestMore than 100 such sales in the same period
Other connections
- Relevant TestPhysical activities may independently create registration duties
Both economic thresholds must be met; assess other business connections separately. Review broader state tax compliance requirements for additional jurisdictions.
2. Separate Marketplace Collection from Seller Registration
A marketplace may collect tax on facilitated sales without ending a seller's separate registration duties. The seller's direct sales and existing registration still matter. Separate the platform's collection records from the seller's own filing obligations.
Check Which Party Collects the Tax
Under Tax Law § 1101(e), qualifying marketplace providers generally collect tax on taxable facilitated sales. Sellers should confirm the arrangement.
- Identify sales made through marketplaces and the seller's own website.
- Verify tax collection reports and marketplace provider documentation.
- Include marketplace transactions when reviewing the remote-seller threshold.
Review Filing and Product Taxability
Registered sellers still file returns when a platform remits tax. Marketplace-facilitated property sales are generally reported as gross and nontaxable sales.
- Reconcile platform statements, direct orders, refunds, and exempt transactions.
- Check taxable goods and services instead of assuming every digital sale is exempt.
- Review remote-access prewritten software, generally taxable, separately from other digital offerings.
3. Reconstruct Past Sales before Answering a Tax Notice
An overlooked sales threshold does not, by itself, establish a crime. Determine when a registration duty arose, then reconcile taxable receipts and tax already paid. A tax bill or audit can restrict corrective options. A broader state and local tax review may identify other obligations.
Build a Reliable State-by-State Record
Order data often sits across payment processors, online stores, and fulfillment services. Preserve original records before changing classifications.
- Export dated sales and delivery destinations for the relevant periods.
- Separate taxable receipts, documented exemptions, and tax already remitted.
- Compare filing histories with registration dates and collection records.
Assess Disclosure or Payment Options
The voluntary disclosure program can help eligible nonfilers, but an existing bill, relevant audit, or criminal investigation may prevent participation.
- Determine whether a return was never filed or tax was reported but unpaid.
- For voluntary disclosure, wait for acceptance and an agreement before filing covered returns.
- Review possible interest, penalties, and sales tax delinquency issues.
4. Distinguish Tax Debt from Criminal Allegations
Unpaid sales tax may expose both a business and responsible individuals to assessments under Tax Law § 1133. Criminal offenses under § 1817 require proof of their own elements, including willfulness for specified violations. An unpaid balance alone does not establish criminal intent. Preserve records before answering allegations.
Identify the Actual Allegation
An audit adjustment is not a criminal accusation. Identify the notice, disputed tax periods, and response deadline before acting.
- Identify the taxing authority, stated periods, and amounts disputed.
- Determine whether the issue concerns registration, collection, or remittance.
- Review any claimed willful conduct under Tax Law § 1817.
Protect Records and Evaluate the Response
A calculation dispute calls for sales records; an allegation of intentional wrongdoing requires separate legal analysis.
- Preserve source documents, filings, correspondence, and accounting access logs.
- Compare the assessment with underlying transactions before challenging figures.
- Seek legal review before responding if investigators allege intentional violations.
5. Frequently Asked Questions
Can exempt transactions count toward economic nexus?
Yes. Qualifying sales of tangible personal property may count toward the thresholds even when tax is not due on a transaction.
Does dropping below the sales threshold end filing duties?
Not automatically. A registered seller generally must continue filing until its registration is properly ended, and other connections may still create obligations.
How quickly must a remote seller register after crossing the threshold?
The tax department specifies registration within 30 days after meeting the thresholds and collection beginning 20 days later. Review the applicable period.
Can a seller challenge a disputed sales tax assessment?
Potentially. Available administrative procedures and filing deadlines depend on the notice issued. Review the stated deadline before submitting a challenge.
6. Discuss Multistate Sales Tax Exposure with SJKP
A notice covering years of online sales calls for a close look at the transactions behind it. SJKP's attorneys can examine nexus records, filing gaps, and potential civil or criminal exposure. Contact SJKP to discuss the relevant periods and available response procedures.
15 Jan, 2026
