What happens in a multistate nexus study?

The facts: people, property, and the questions behind the questionnaire

The questionnaire is organized by state and by category, employees and where they live and work, independent contractors and what they are engaged to do, inventory and where it sits, including third-party warehouses and fulfillment arrangements, owned or leased property, vehicles, trade shows and events, and licenses already held. Its answers are the beginning of the work, not the end, because the legally decisive facts hide one level below the checkbox. An employee marked present in a state matters differently if the person solicits orders, performs service work, or works remotely in a back-office role. A contractor matters differently if engaged to sell than to consult. The follow-up interviews chase these distinctions, and a few hypothetical examples show why. Sales titles must be translated into duty descriptions, because what a salesperson does on a customer visit, taking orders only or also handling returns, collections, or training, decides income tax protection under the federal solicitation statute, activity by activity, as the companion article on Public Law 86-272 details. An employee who drives a company vehicle to a trade show in another state raises a question the org chart never answers: does anyone sell product at the event? A sample carried for demonstration and an item sold on the spot are different legal events; the second is an in-state sale from in-state stock, which falls outside protected solicitation unless it is de minimis, the exception the Supreme Court reserved for activities that establish no nontrivial additional connection with the taxing state, and it starts collection obligations (Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992)). California draws the same line on the sales tax side: a retailer whose only presence is brief trade show appearances can stay outside engaged-in-business status, but the sales and orders made at the show remain subject to collection (Rev. and Tax. Code section 6203(d)). Inventory placed by a fulfillment provider can create presence in states the company has never visited; New York treats it as ending Public Law 86-272 protection (20 NYCRR 1-2.10, Example 14), and California's Office of Tax Appeals held an out-of-state seller with fulfillment inventory and California sales to the minimum franchise tax (Appeal of Fishbone Apparel, Inc., 2026-OTA-141, nonprecedential), although a Pennsylvania court held that storage controlled entirely by the fulfillment provider did not, by itself, give that state jurisdiction over the merchants (Online Merchants Guild v. Hassell, No. 179 M.D. 2021 (Pa. Commw. Ct. Sept. 9, 2022) (en banc)). The questionnaire also covers website functions, because New York treats some internet activities, such as post-sale assistance by chat or email, as outside Public Law 86-272 protection, and a New York appellate court upheld that regulation against a facial preemption challenge in 2026 (20 NYCRR 1-2.10; American Catalog Mailers Association v. Department of Taxation and Finance, 2026 NY Slip Op 02908 (3d Dept May 7, 2026)). California's parallel administrative guidance on internet activities fared differently: a trial court held it void for want of rulemaking, and that judgment is final, no appeal having been taken (American Catalog Mailers Association v. Franchise Tax Board, No. CGC-22-601363 (San Francisco Superior Court 2023)). None of this is exotic; all of it is invisible until someone asks the second question.

The law, applied twice: sales tax and income tax are different maps

The same facts then run through two separate analyses per state. For sales and use tax, physical presence of any meaningful kind, employees, agents or contractors soliciting or servicing, inventory, property, generally creates a collection obligation from the first taxable sale, and where physical presence is absent, the post-Wayfair economic thresholds, measured in dollars or transaction counts that vary by state, do the work instead. Physical presence trumps the thresholds, not the other way around: a company below a state's dollar threshold but with a rep soliciting there is already in, whether the solicitor is an employee or an independent contractor (Scripto, Inc. v. Carson, 362 U.S. 207 (1960)), and no federal statute shields in-state solicitation from a sales tax collection duty the way Public Law 86-272 shields it from net income tax (15 U.S.C. sections 381, 383). For income taxes, the map inverts. Physical presence matters, economic nexus doctrines reach further every year, but sellers of tangible personal property hold the federal solicitation shield against taxes imposed on or measured by net income, a shield that does not reach the Texas franchise tax or other taxes not measured by net income (15 U.S.C. sections 381(a), 383; 34 Tex. Admin. Code section 3.586(i)). Texas reaches a remote company at $500,000 of Texas gross receipts for periods ending in 2019 or later (34 Tex. Admin. Code section 3.586(f)(1)), so a seller fully protected from net income taxes can still owe franchise tax there, and the study has to run that analysis separately. The shield also stops at tangible goods; a seller of services takes nothing from it, a line left standing in October 2026 when the United States Supreme Court declined to review a Wisconsin decision denying protection to a seller of travel services (ASAP Cruises, Inc. v. Wisconsin Department of Revenue, No. 2023AP1251 (Wis. Ct. App. June 3, 2025) (unpublished), cert. denied, No. 26-92 (U.S. Oct. 5, 2026)). So the income tax analysis is whether each state's activities stay inside protected solicitation or break it, and gross receipts regimes in a handful of states tax what income taxes cannot. The matrix that results has four possible cells per state and tax, and every cell has a consequence: obligated and compliant, obligated and exposed, protected, or absent. The exposed cells get priced, tax, interest, penalty, times open years, because a non-filer usually has no statute of limitations running at all. California income tax can be assessed at any time when no return was filed (Rev. and Tax. Code section 19087(a)), and Washington's four-year limit does not run against an unregistered taxpayer (Wash. Rev. Code section 82.32.050(4)(a)), although the rule has exceptions, California capping non-filer sales and use tax determinations at eight years (Rev. and Tax. Code section 6487(a)). That open-ended lookback is what makes it the largest number in the study and voluntary disclosure, with its capped lookback and penalty relief, the standard exit, with the caveat that interest generally remains due even under the Multistate Tax Commission's multistate program.

The outcome: a ledger, not a verdict, and sometimes a savings

The deliverable is the matrix with a recommendation per state, and the recommendations sort into a familiar set: register and begin collecting prospectively where obligations are new; negotiate voluntary disclosure where exposure has history; file protectively where nexus is arguable and the cost is small, with the caution that a protective return is a filed return, and filing closes voluntary disclosure for that tax in states that treat a filed return as disqualifying contact (Rev. and Tax. Code section 19192(a)(1)(B)); stay out, with documented reasons, where the facts support absence. Then comes the side of the ledger that reframes the study, and throwback is the clearest example, provided its mechanics are stated correctly. Under California's version of the rule, sales of tangible personal property shipped from an office, warehouse, or other place of storage in California stay out of the California numerator when the company is taxable in the purchaser's state, either because it is subject to a qualifying tax there or because its activities there exceed Public Law 86-272 protection, and the company must furnish evidence of that taxability on the Franchise Tax Board's request (Rev. and Tax. Code sections 25122, 25135(a)(2); Cal. Code Regs., tit. 18, section 25122(b)(1), (c)). The trigger is the ship-from state, not the headquarters state; only tangible goods are thrown back, never services or intangibles; and sales to the United States government are thrown back whatever the destination (Rev. and Tax. Code section 25135(a)(2)). Since 2011 California has tested taxability at the level of the combined group, so one member's taxability in the destination state keeps the whole group's receipts to that state out of the numerator (Rev. and Tax. Code section 25135(b)). For a profitable company shipping from a high-rate throwback state, each destination state where the study documents taxability removes those receipts from the shipping state's numerator, and the arithmetic of moving apportionment points from a high rate to lower ones, or to states where the company shows little income after their own apportionment, can produce annual savings that dwarf the study's cost, plus refund claims for open prior years computed on the same analysis. The candid framing: the study will probably find both things, obligations the company did not know it had and money it did not know it was leaving, and the two are often the same facts viewed from different states. What the study cannot be is static. Nexus is a moving target, thresholds and doctrines change, sales mixes shift, people move, and the responsible cadence is an annual refresh of the data pulls and a re-interview whenever the sales model, fulfillment arrangements, or headcount map changes materially.

Practice notes

The disciplines that make a study reliable: interviewing past the questionnaire, always, and writing the duty descriptions down, because they are the evidence for every position the study takes; pulling transaction counts as well as dollars, since a shrinking number of states still count transactions; treating vehicles, events, samples, website functions, and third-party inventory as their own inquiry rather than footnotes; and dating every activity, because nexus is tested period by period and refund claims and lookbacks both turn on when things started. Both sides of the ledger deserve pricing before any recommendation; the register-everywhere reflex has a compliance cost that only makes sense against quantified exposure or savings. The exits run in a fixed order for voluntary disclosure: in a state with material history, the application comes before registering or filing, since several programs, including both of California's, exclude a taxpayer that has already registered or filed (Rev. and Tax. Code sections 6487.05(a)(1), 19192(a)(1)(B), (a)(2)(A)(ii)). Amnesty programs can run the other way; Illinois's 2026 remote retailer amnesty, running August 1 through October 31, 2026, is open only to retailers registered with the Department and waives both penalties and interest, where a voluntary disclosure agreement typically waives penalties alone (35 ILCS 120/2-13; Illinois Department of Revenue Informational Bulletin FY 2026-28). And the refresh belongs on the calendar, because the study that was right two years ago is a historical document, not a position. G&G State Tax Group provides multistate nexus studies, exposure quantification, and voluntary disclosure representation alongside its state and local tax practice.