The rules that used to tie your state tax obligations to physically being somewhere don’t work like that any more. Economic nexus thresholds mean you can owe filings in a state you have never set foot in, and remote work has turned this into a live problem for companies that never thought of themselves as multi-state at all.
How it happens is simple enough. Someone works from a state, and you have a payroll withholding obligation there almost straight away. In most states that same presence also gives the business income tax nexus, and often a sales tax registration requirement on top.
What makes it expensive is that it piles up. The obligation runs from the day the presence started, not from the day somebody noticed. A hire you made two years ago has quietly generated two years of unfiled returns, with penalties accruing every month since.
The good news is that it’s all quantifiable, and it is usually much cheaper to sort out voluntarily. Most states run voluntary disclosure programmes that cap how far back they’ll look, commonly three or four years instead of forever, and they normally waive the penalties if you come forward before they find you.
What you want is a nexus study covering every state where you have employees, contractors, inventory or meaningful sales. That tells you where the obligations sit, what has already built up, and which states are worth approaching yourself rather than waiting on.
The businesses that get burned here are hardly ever the ones that made some aggressive decision. They are the ones that hired a good candidate who happened to live somewhere else, and never thought of it as a tax event.