- United States
- State sales tax, economic and physical nexus
- Canada
- GST/HST plus provincial regimes
- We aim for
- The fewest registrations that are correct
- Also handled
- Voluntary disclosure where there is history
Sales tax and GST/HST, in both countries
Working out where you actually owe, registering only where you must, and then filing on time. The goal is the smallest correct footprint, not the largest cautious one.
- Under-registering costs
- Uncollected tax out of your own margin
- Over-registering costs
- Permanent filing obligations you cannot easily undo
The expensive mistakes here go in both directions.
One failure is collecting nothing while an obligation quietly accrues, which is what happens when a business crosses an economic nexus threshold it did not know existed. The liability is the tax you should have collected, and you generally cannot go back and charge the customer, so it comes out of your margin along with interest and penalties.
The other failure is the over-correction. A business gets frightened, registers in twenty states, and inherits twenty ongoing filing obligations including zero returns in states where it sells almost nothing. Deregistering is not always straightforward and the compliance cost is permanent.
The work is in finding the actual boundary: where presence or volume has genuinely created a duty, where a marketplace has already assumed it, and where nothing is owed at all. That is a research question about your specific sales data, and it is not answerable from a summary chart.
Where an obligation comes from.
What creates an obligation you did not choose
- Physical presence. An office, a warehouse, stock held in a third party fulfilment centre, or an employee working from home in that state.
- Economic nexus. Crossing a state's revenue or transaction threshold from remote sales alone, with no physical presence at all.
- Inventory you did not place. A fulfilment network moving your stock into a state can create nexus there without you deciding anything.
- Marketplace facilitation. Some marketplaces collect and remit on your behalf, which changes what you file but does not always remove the registration.
- Canadian GST/HST. A worldwide taxable revenue threshold, after which registration is mandatory and immediate.
- Provincial sales taxes. British Columbia, Saskatchewan, Manitoba and Quebec run their own regimes alongside GST.
Common questions
Almost certainly not. You register where you have crossed a threshold or have physical presence, which for most small sellers is a handful of states rather than all of them. Registering everywhere pre-emptively creates dozens of returns you must then file forever, including zero returns. That is a common and expensive over-correction.
Not necessarily. Marketplace facilitator rules usually shift the collection duty to the marketplace, but if you also sell through your own website into the same state, that channel is still yours. Some states also still want a registration and a return showing the marketplace sales even though you did not collect them.
Often yes. Voluntary registration lets you claim input tax credits on what you buy, which is worth real money if you have meaningful Canadian costs. The trade off is that you must then charge, file and remit from that point. We run the arithmetic before deciding.
Then the priority is stopping the exposure growing and then addressing the history, often through a voluntary disclosure where one is available. States generally treat a taxpayer who comes forward far better than one they find. Do not simply start collecting and hope the past is not noticed, because the registration date itself invites the question.
Not sure where you are registered, or should be?
Send us twelve months of sales by state or province and we will map the exposure.