INSIGHT

Tax Alert: State Tax Nexus Is Changing Fast

Dilyana Antevil • June 2, 2026

Services: Tax

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Recent regulatory activity is narrowing the protections many businesses assumed they had and expanding the reach of state income taxes to digital operations. If your business sells across state lines, your nexus footprint may look very different today than it did two years ago. 

The P.L. 86-272 Shield Is Shrinking 

Public Law 86-272 has long protected out-of-state businesses from state income tax when their only in-state activity was soliciting orders for sales of tangible personal property. That protection is under systematic attack. 

Following the Multistate Tax Commission’s 2021 revised guidance, a growing number of states now treat common website activities as creating income tax nexus. Activities most businesses never thought about can now trigger a filing obligation. New Jersey formalized this position with regulations effective June 16, 2025¹. Massachusetts amended its corporate excise tax regulations² effective October 10, 2025. New York promulgated similar regulations in December 2023³, and the New York Supreme Court, Appellate Division upheld them in May 2026⁴. 

Under these state interpretations, activities that may establish nexus include: 

• Placing internet cookies on users’ devices for market research or product development 
• Offering post-sale support via online chat or email 
• Accepting job applications from in-state residents for non-sales roles 
• Providing targeted advertising services to in-state businesses 

California adopted guidance⁵ consistent with this approach in 2022. Though a court later invalidated it on procedural grounds⁶, businesses report that state auditors continue to apply its principles in examinations. 

Congress introduced the Interstate Commerce Simplification Act of 2025 (H.R. 427) in January 2025. The Act would have expanded the definition of “solicitation” to protect common digital activities from state income tax. The language from the Act was not included in the final reconciliation bill, H.R.1, The One Bug Beautiful Bill Act (OBBBA), leaving multistate businesses without updated federal protection. 

Economic Nexus Thresholds Are Evolving, Too 

States are also modifying the thresholds that trigger income and sales tax obligations for remote sellers. For example: 

• Alaska eliminated its 200-transaction threshold effective January 1, 2025. Sales tax nexus is now triggered solely by $100,000 in gross sales from in-state customers.⁷ 

• Arkansas established a bright-line economic nexus threshold of $250,000 in gross receipts for nonresident corporate income tax, alongside a shift to market-based sourcing for services and intangible property effective January 1, 2026.⁸ 

• Illinois followed suit in removing the 200-transaction threshold, and effective January 1, 2026, out-of-state remote retailers establish sales tax nexus solely based on $100,000 of gross receipts from in-state customers. ⁹. 

• Utah removed its 200-transaction threshold, making gross receipts of $100,000 or more the main factor for sales tax nexus effective July 1, 2025.¹⁰ 

• These changes are not hypothetical. State tax authorities are increasing nexus audits, and the compliance landscape is shifting faster than most businesses can monitor on their own. 

What You Should Do Now 

A proactive nexus review can identify new filing obligations, surface potential exposure before an audit does, and reveal opportunities to reduce your overall state tax burden. Having nexus in additional states does not necessarily mean paying more total state taxes. It frequently means the opposite. 

Contact your BPM tax service partner to connect with our state and local tax professionals.