As states seek more revenue and sharpen their audit strategies, businesses selling remotely into the US are finding that compliance risk no longer turns on traditional indicators such as offices, employees or storefronts. Instead, states are asserting nexus based on inventory locations, digital contacts, remote workforces and platform-based business models, often in ways that are neither intuitive nor consistent across jurisdictions.
Recent cases, legislative changes and enforcement trends show that states are not just expanding nexus concepts—they are testing their limits. Bright-line thresholds are increasingly treated as a floor rather than a ceiling, marketplaces may face collection responsibility even for pre-marketplace law periods and digital footprints such as cookies are emerging as possible nexus triggers. This article highlights key nexus and taxability issues businesses selling remotely into the US should assess to avoid unexpected assessments and growing multistate exposure.
Inventory Nexus
Retailers that sell through marketplace platforms typically retain ownership of their inventory while contracting with marketplace facilitators to handle storage, order processing and delivery to customers. Under this arrangement, the facilitator determines where the inventory is warehoused to ensure efficient fulfilment, but the seller remains the owner of the goods until they are sold.
Because the seller owns tangible personal property physically located in the state, the presence of inventory is often sufficient to establish sales tax nexus. Consistent with this view, Streamlined Sales Tax Governing Board materials and state guidance indicate that a retailer’s sole in‑state activity—having inventory stored and managed by a third‑party fulfilment provider—may create sales tax nexus in approximately 20 states.
That said, not all states treat third‑party‑controlled inventory as nexus‑creating. Some jurisdictions have issued guidance providing that inventory alone, when stored in a location selected and controlled entirely by a third party, does not establish sales tax nexus. For example, a recent ruling in Oklahoma indicated that a seller does not have physical nexus where its only in‑state presence is inventory owned by the seller but stored in a third‑party warehouse over which the seller exercises no control. The ruling also noted that the seller’s direct sales through its own website were below Oklahoma’s USD 100,000 economic nexus threshold and did not trigger a collection obligation. By contrast, sales made through the marketplace facilitator remained the responsibility of the facilitator for collection and remittance.
Retailers using marketplace facilitators should not assume the existence of uniform nexus standards but rather should regularly evaluate state‑specific guidance to assess whether inventory location or sales activity may create sales tax nexus or nexus for other taxes, as discussed further below.
Inventory Nexus Spillover
Selling through a marketplace platform that stores inventory in a third-party fulfilment centre may shift sales tax collection and remittance obligations from the remote seller to the marketplace facilitator, but it does not relieve the seller of other state and local tax obligations. In practice, remote sellers often overlook these non-sales-tax obligations by incorrectly assuming that the marketplace facilitator’s sales tax compliance fully satisfies their state tax responsibilities.
For example, in a 2025 California case, the Office of Tax Appeals (OTA) held that an out-of-state retailer with no employees, office or other physical operations in California was nevertheless “doing business” in the state for franchise tax purposes because it stored inventory in an Amazon fulfilment warehouse in California for sale. The decision also highlights that state tax authorities may obtain information from marketplace facilitators and third-party fulfilment providers to identify remote sellers with in-state inventory. In upholding the assessment, the decision confirms that inventory held by a third-party fulfilment provider is attributed to the seller for nexus purposes, which can create income/franchise, gross receipts and other tax obligations based solely on inventory placement.
Remote sellers should not assume that marketplace facilitator sales tax collection eliminates other state and local tax obligations. They should monitor inventory locations as they change over time, review marketplace and fulfilment arrangements, and assess whether inventory creates nexus for income, franchise or other state taxes.
Blurred Bright-Line Nexus Rules
In 2026, more than a dozen US states have bright-line corporate net income tax nexus rules that establish thresholds for economic nexus based on sales into the state or the amount of in-state payroll or property. Many other states take a less formulaic approach and assert nexus more broadly where a company is doing business in the state or deriving income from sources within the state. For remote businesses, this disconnect between bright-line nexus rules and broader doing‑business standards can result in unexpected exposure when bright-line thresholds are mistakenly treated as safe harbours.
Another California case highlights that a business with even one employee in the state may be considered “doing business” in the state and therefore subject to a franchise tax filing obligation, even if the employee’s compensation falls below the bright-line nexus threshold. In practice, remote businesses often mistakenly assume that falling below a state’s bright-line nexus thresholds—such as a payroll threshold—means they do not have nexus. However, as this case shows, California’s bright-line nexus rules are not safe harbours, and businesses must still consider whether they are actively engaging in transactions for financial gain in the state. Even without in-state property or sales activity beyond the employee’s presence, the OTA found the doing-business standard was met, underscoring that remote sellers with distributed workforces may incur unintended income tax filing and payment obligations.
Emerging Trend of “Cookie Nexus”
Retailers may use internet cookies on their websites and digital platforms to collect information about customer behaviour, facilitate online transactions and support functions such as marketing analytics, personalisation, fraud prevention and product development. States are increasingly asserting that these customer interactions may be sufficient to establish nexus.
In 2021, the Multistate Tax Commission (MTC), an intergovernmental state tax agency, stated that when a business interacts with a customer through its website or mobile application, the business may be engaging in a business activity within the customer’s state. According to the MTC, such activity may include placing internet cookies on in‑state customers’ devices to gather information used to solicit orders for tangible personal property, adjust production schedules or inventory levels, develop new products or identify additional items to offer for sale.
More recently, MTC officials have indicated that states are likely to pursue nexus assertions aggressively based on in‑state use of internet cookies. In their view, this expanded nexus approach may be supported by a 2025 federal appeals court decision, in which the court held that tracking cookies placed on a California consumer's device could support personal jurisdiction in a privacy lawsuit. Although the decision did not involve taxes, its reasoning may influence state tax authorities evaluating digital contacts for nexus purposes. By contrast, the Massachusetts Supreme Judicial Court has held that an out-‑of-state retailer with only digital or “cookie” contacts in Massachusetts lacked the physical presence required to collect sales and use tax for ‑pre‑Wayfair periods. Given the uncertainty and evolving state positions, businesses should be proactive in preparing for increased audit scrutiny related to nexus.
Marketplace Retroactivity Liability
Marketplace facilitator laws, now adopted by every sales tax imposing state and the District of Columbia, require entities that operate physical or virtual marketplaces to collect and remit sales tax on behalf of sellers using their platforms. These laws shift the collection responsibility from individual retailers to marketplace facilitators, centralise tax collection and reporting, extend collection obligations to sellers that do not independently meet economic nexus thresholds and reduce the number of sales tax returns states must process.
Notably, some states have asserted that their pre‑Wayfair statutes already imposed comparable collection and remittance obligations, taking the position that marketplace facilitator legislation merely clarified existing law rather than effectuating a substantive change. Consistent with this view, recent decisions highlight that online marketplaces were responsible for sales tax collection even for periods preceding the enactment of specific marketplace facilitator statutes.
A marketplace facilitator is generally defined as an entity that owns or operates a marketplace or platform and directly or indirectly processes transactions on behalf of marketplace sellers. Because state definitions vary—and some are drafted quite broadly—businesses that do not view themselves as facilitators may nonetheless fall within scope, even if they are not directly involved in payment processing.
Companies that are unaware of these rules may have failed to collect and remit sales tax or file required returns, leaving the statute of limitations open and creating significant historical exposure. Businesses should promptly assess whether their activities trigger marketplace facilitator obligations in any state and, if so, evaluate remediation options before enforcement action occurs.
Improper Taxability Characterisation
During audits or due diligence reviews, businesses may discover that their understanding of what their product is—and how it functions—differs from how the product is characterised by taxing authorities or other third parties. These differing characterisations can have significant sales tax consequences.
For example, a wearable tracking device that measures temperature may be characterised by one party as a thermometer, which, as a qualifying medical device, may be exempt from sales tax or taxable in only a limited number of states. However, if the same device also includes additional functionality—such as step tracking, heart rate monitoring, sleep analysis or interchangeable wearable bands—it may instead be characterised as a broader consumer electronic or fitness device. Under that characterisation, the product could be subject to sales tax in a substantially larger number of states.
These classification differences can be exacerbated when products are improperly coded within a sales tax engine. If the product is initially mapped to a tax category based on an overly narrow or incomplete understanding of its functionality, the engine may apply exemptions or reduced rates that are not supported under a broader characterisation adopted by taxing authorities. Because tax engines rely heavily on upfront product mappings rather than real‑time functional analysis, any misclassification can be systematically replicated across transactions and jurisdictions. Over time, this can result in consistent under‑collection of tax in states where the product is treated as taxable, increasing audit exposure and complicating remediation efforts once the issue is identified.
Over time, this can result in systematic under‑collection of tax in states where the product is considered taxable, increasing audit exposure and complicating remediation. Businesses should therefore proactively review product characterisations, validate sales tax engine mappings and reassess classifications as products evolve to mitigate risk and reduce potential historical exposure.
The developments discussed in this article highlight an accelerating trend: US states are asserting tax obligations based on increasingly minimal, indirect and digital connections, while coordinating enforcement across tax types and data sources. For remote sellers, 2026 should be a year of proactive recalibration rather than reactive cleanup. This means monitoring inventory locations, reassessing nexus across all relevant taxes, validating product taxability and sales tax engine mappings, and reevaluating marketplace and fulfilment arrangements.
Businesses with potential historical exposure should also consider proactive remediation strategies, such as voluntary disclosure agreements, before issues emerge through audits or data‑matching efforts. Addressing these risks early can help remote sellers better manage compliance exposure, maintain operational flexibility and support growth in an increasingly aggressive state tax environment.
Angela Acosta
Ilya Lipin
BDO in United States
Recent cases, legislative changes and enforcement trends show that states are not just expanding nexus concepts—they are testing their limits. Bright-line thresholds are increasingly treated as a floor rather than a ceiling, marketplaces may face collection responsibility even for pre-marketplace law periods and digital footprints such as cookies are emerging as possible nexus triggers. This article highlights key nexus and taxability issues businesses selling remotely into the US should assess to avoid unexpected assessments and growing multistate exposure.
New Nexus Traps for Unwary
Inventory NexusRetailers that sell through marketplace platforms typically retain ownership of their inventory while contracting with marketplace facilitators to handle storage, order processing and delivery to customers. Under this arrangement, the facilitator determines where the inventory is warehoused to ensure efficient fulfilment, but the seller remains the owner of the goods until they are sold.
Because the seller owns tangible personal property physically located in the state, the presence of inventory is often sufficient to establish sales tax nexus. Consistent with this view, Streamlined Sales Tax Governing Board materials and state guidance indicate that a retailer’s sole in‑state activity—having inventory stored and managed by a third‑party fulfilment provider—may create sales tax nexus in approximately 20 states.
That said, not all states treat third‑party‑controlled inventory as nexus‑creating. Some jurisdictions have issued guidance providing that inventory alone, when stored in a location selected and controlled entirely by a third party, does not establish sales tax nexus. For example, a recent ruling in Oklahoma indicated that a seller does not have physical nexus where its only in‑state presence is inventory owned by the seller but stored in a third‑party warehouse over which the seller exercises no control. The ruling also noted that the seller’s direct sales through its own website were below Oklahoma’s USD 100,000 economic nexus threshold and did not trigger a collection obligation. By contrast, sales made through the marketplace facilitator remained the responsibility of the facilitator for collection and remittance.
Retailers using marketplace facilitators should not assume the existence of uniform nexus standards but rather should regularly evaluate state‑specific guidance to assess whether inventory location or sales activity may create sales tax nexus or nexus for other taxes, as discussed further below.
Inventory Nexus Spillover
Selling through a marketplace platform that stores inventory in a third-party fulfilment centre may shift sales tax collection and remittance obligations from the remote seller to the marketplace facilitator, but it does not relieve the seller of other state and local tax obligations. In practice, remote sellers often overlook these non-sales-tax obligations by incorrectly assuming that the marketplace facilitator’s sales tax compliance fully satisfies their state tax responsibilities.
For example, in a 2025 California case, the Office of Tax Appeals (OTA) held that an out-of-state retailer with no employees, office or other physical operations in California was nevertheless “doing business” in the state for franchise tax purposes because it stored inventory in an Amazon fulfilment warehouse in California for sale. The decision also highlights that state tax authorities may obtain information from marketplace facilitators and third-party fulfilment providers to identify remote sellers with in-state inventory. In upholding the assessment, the decision confirms that inventory held by a third-party fulfilment provider is attributed to the seller for nexus purposes, which can create income/franchise, gross receipts and other tax obligations based solely on inventory placement.
Remote sellers should not assume that marketplace facilitator sales tax collection eliminates other state and local tax obligations. They should monitor inventory locations as they change over time, review marketplace and fulfilment arrangements, and assess whether inventory creates nexus for income, franchise or other state taxes.
Blurred Bright-Line Nexus Rules
In 2026, more than a dozen US states have bright-line corporate net income tax nexus rules that establish thresholds for economic nexus based on sales into the state or the amount of in-state payroll or property. Many other states take a less formulaic approach and assert nexus more broadly where a company is doing business in the state or deriving income from sources within the state. For remote businesses, this disconnect between bright-line nexus rules and broader doing‑business standards can result in unexpected exposure when bright-line thresholds are mistakenly treated as safe harbours.
Another California case highlights that a business with even one employee in the state may be considered “doing business” in the state and therefore subject to a franchise tax filing obligation, even if the employee’s compensation falls below the bright-line nexus threshold. In practice, remote businesses often mistakenly assume that falling below a state’s bright-line nexus thresholds—such as a payroll threshold—means they do not have nexus. However, as this case shows, California’s bright-line nexus rules are not safe harbours, and businesses must still consider whether they are actively engaging in transactions for financial gain in the state. Even without in-state property or sales activity beyond the employee’s presence, the OTA found the doing-business standard was met, underscoring that remote sellers with distributed workforces may incur unintended income tax filing and payment obligations.
Emerging Trend of “Cookie Nexus”
Retailers may use internet cookies on their websites and digital platforms to collect information about customer behaviour, facilitate online transactions and support functions such as marketing analytics, personalisation, fraud prevention and product development. States are increasingly asserting that these customer interactions may be sufficient to establish nexus.
In 2021, the Multistate Tax Commission (MTC), an intergovernmental state tax agency, stated that when a business interacts with a customer through its website or mobile application, the business may be engaging in a business activity within the customer’s state. According to the MTC, such activity may include placing internet cookies on in‑state customers’ devices to gather information used to solicit orders for tangible personal property, adjust production schedules or inventory levels, develop new products or identify additional items to offer for sale.
More recently, MTC officials have indicated that states are likely to pursue nexus assertions aggressively based on in‑state use of internet cookies. In their view, this expanded nexus approach may be supported by a 2025 federal appeals court decision, in which the court held that tracking cookies placed on a California consumer's device could support personal jurisdiction in a privacy lawsuit. Although the decision did not involve taxes, its reasoning may influence state tax authorities evaluating digital contacts for nexus purposes. By contrast, the Massachusetts Supreme Judicial Court has held that an out-‑of-state retailer with only digital or “cookie” contacts in Massachusetts lacked the physical presence required to collect sales and use tax for ‑pre‑Wayfair periods. Given the uncertainty and evolving state positions, businesses should be proactive in preparing for increased audit scrutiny related to nexus.
Marketplace Retroactivity Liability
Marketplace facilitator laws, now adopted by every sales tax imposing state and the District of Columbia, require entities that operate physical or virtual marketplaces to collect and remit sales tax on behalf of sellers using their platforms. These laws shift the collection responsibility from individual retailers to marketplace facilitators, centralise tax collection and reporting, extend collection obligations to sellers that do not independently meet economic nexus thresholds and reduce the number of sales tax returns states must process.
Notably, some states have asserted that their pre‑Wayfair statutes already imposed comparable collection and remittance obligations, taking the position that marketplace facilitator legislation merely clarified existing law rather than effectuating a substantive change. Consistent with this view, recent decisions highlight that online marketplaces were responsible for sales tax collection even for periods preceding the enactment of specific marketplace facilitator statutes.
A marketplace facilitator is generally defined as an entity that owns or operates a marketplace or platform and directly or indirectly processes transactions on behalf of marketplace sellers. Because state definitions vary—and some are drafted quite broadly—businesses that do not view themselves as facilitators may nonetheless fall within scope, even if they are not directly involved in payment processing.
Companies that are unaware of these rules may have failed to collect and remit sales tax or file required returns, leaving the statute of limitations open and creating significant historical exposure. Businesses should promptly assess whether their activities trigger marketplace facilitator obligations in any state and, if so, evaluate remediation options before enforcement action occurs.
Improper Taxability Characterisation
During audits or due diligence reviews, businesses may discover that their understanding of what their product is—and how it functions—differs from how the product is characterised by taxing authorities or other third parties. These differing characterisations can have significant sales tax consequences.
For example, a wearable tracking device that measures temperature may be characterised by one party as a thermometer, which, as a qualifying medical device, may be exempt from sales tax or taxable in only a limited number of states. However, if the same device also includes additional functionality—such as step tracking, heart rate monitoring, sleep analysis or interchangeable wearable bands—it may instead be characterised as a broader consumer electronic or fitness device. Under that characterisation, the product could be subject to sales tax in a substantially larger number of states.
These classification differences can be exacerbated when products are improperly coded within a sales tax engine. If the product is initially mapped to a tax category based on an overly narrow or incomplete understanding of its functionality, the engine may apply exemptions or reduced rates that are not supported under a broader characterisation adopted by taxing authorities. Because tax engines rely heavily on upfront product mappings rather than real‑time functional analysis, any misclassification can be systematically replicated across transactions and jurisdictions. Over time, this can result in consistent under‑collection of tax in states where the product is treated as taxable, increasing audit exposure and complicating remediation efforts once the issue is identified.
Over time, this can result in systematic under‑collection of tax in states where the product is considered taxable, increasing audit exposure and complicating remediation. Businesses should therefore proactively review product characterisations, validate sales tax engine mappings and reassess classifications as products evolve to mitigate risk and reduce potential historical exposure.
BDO Takeaways
The developments discussed in this article highlight an accelerating trend: US states are asserting tax obligations based on increasingly minimal, indirect and digital connections, while coordinating enforcement across tax types and data sources. For remote sellers, 2026 should be a year of proactive recalibration rather than reactive cleanup. This means monitoring inventory locations, reassessing nexus across all relevant taxes, validating product taxability and sales tax engine mappings, and reevaluating marketplace and fulfilment arrangements.Businesses with potential historical exposure should also consider proactive remediation strategies, such as voluntary disclosure agreements, before issues emerge through audits or data‑matching efforts. Addressing these risks early can help remote sellers better manage compliance exposure, maintain operational flexibility and support growth in an increasingly aggressive state tax environment.
Angela Acosta
Ilya Lipin
BDO in United States