Does a Remote Employee
Create Sales Tax Nexus?
Short answer: Yes, in most states. If you have an employee working from home in another state, you probably have nexus there.
The rule is simple: An employee in a state = physical presence = nexus. It doesn't matter if they work from home, never meet customers, or only do engineering work. Their physical presence in the state creates a tax obligation for your company.
Why This Catches People Off Guard
Before 2018, you needed physical presence to have nexus. Remote employees created that presence. After 2018 (the Wayfair decision), states added economic nexus—but they kept the physical presence rules too.
So now you can have nexus in a state two ways:
- Economic nexus: Enough sales to the state (usually $100K-$500K)
- Physical nexus: Any employee, contractor, or property in the state
The remote employee triggers the second one, regardless of your sales volume. You could have $5,000 in sales to California but nexus there because your engineer lives in San Diego.
Common Scenarios
"We hired a remote engineer in Texas"
You now have Texas nexus. If you sell taxable products (including SaaS in Texas), you need to register and collect tax from Texas customers.
Texas is aggressive about enforcement. Don't wait.
"Our salesperson moved to New York"
You now have New York nexus. New York taxes SaaS at 4% plus local rates. You need to register within 20 days of the triggering event.
New York has high thresholds for economic nexus ($500K + 100 transactions), but physical presence bypasses those thresholds.
"An employee moved to California during COVID"
You have California nexus. The good news: California doesn't tax SaaS. You may still need to register and file $0 returns, but you won't owe tax on your software sales.
Check if you sell any tangible goods or non-SaaS services to CA customers.
"We use contractors, not employees"
Contractors who perform sales activities on your behalf can create nexus. Contractors who just do development work are less clear—it varies by state.
Texas and New York count sales-related contractors. California is more lenient.
What To Do When You Hire Remotely
Check If SaaS Is Taxable There
Not all states tax SaaS. If your new employee is in California, Florida, or Georgia, you have nexus but might not owe anything on software sales.
Register Before Their Start Date
Most states require registration before you start collecting tax. The employee's first day is when nexus begins.
Update Your Tax Automation
If you use Avalara, TaxJar, or similar, add the new state to your collection settings. If you don't have automation, this is a good time to get it.
Track The Triggering Date
Document when the employee started. If you're ever audited, you'll need to show when nexus began.
Quick Reference: Employee Nexus by State
For the 10 states we cover, here's what happens when you hire someone there:
| State | SaaS Taxable? | Action Needed |
|---|---|---|
| Texas | Yes (6.25%) | Register + collect immediately |
| California | No | May still need to register |
| New York | Yes (4%+) | Register + collect immediately |
| Florida | No | Register but no SaaS tax |
| Pennsylvania | Yes (6%) | Register + collect immediately |
| Illinois | Mostly no* | Register; Chicago has local tax |
| Washington | B&O tax | Register for B&O, not sales tax |
| Massachusetts | Yes (6.25%) | Register + collect immediately |
| Colorado | State no, local varies | Check local jurisdictions |
| Georgia | No | Register but no SaaS tax |
Check All Your Nexus Triggers
Remote employees are just one way to create nexus. Our free analysis checks economic nexus thresholds too.
Run Full Nexus Check