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Know where you owe sales tax

Avalara Sales Tax Risk Assessments can help you identify where you’ve triggered nexus so you can meet your U.S. sales tax obligations.
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Know where you owe sales tax

Avalara Sales Tax Risk Assessments can help you identify where you’ve triggered nexus so you can meet your U.S. sales tax obligations.

BENEFITS

Start your road to compliance

Know where you owe

Find out where you likely already owe sales tax — and where you’re most likely to trigger new tax obligations.

Stay current with tax laws

Get the latest economic nexus thresholds for each state where you operate, based on current legislation.

Uncover your sales tax risk

Understand potential compliance gaps instantly with a straightforward report tailored to your business footprint.

Get a compliance snapshot

Gain a high-level view of your sales tax risk without any financial commitment or obligation to purchase. Or pay for a more detailed report.

Accelerate your tax decisions

Use clear, actionable results to quickly determine whether further tax planning or automation is needed.

Have peace of mind

Confidently make informed decisions and reduce tax compliance uncertainty.

HOW IT WORKS

Assessing your tax obligations

Select the states where you make sales

Check all states where you make sales — whether you currently collect sales tax and file sales tax returns there or not. For standard and premium assessments, you’ll fill out a detailed questionnaire about your business so we can understand your specific business activities and relationships.

Identify the states where you meet or exceed the nexus threshold

With our free risk assessment, you’ll be provided the regularly updated economic nexus laws within each state you indicated that you do business in. If you selected our standard or premium risk assessment, our tax experts will compare your business activities with state-specific rules and laws to identify your nexus footprint.

Get expert insights and a customized action plan

Based on your responses, you may have economic or physical nexus and a sales tax obligation in the states listed by the assessment. With our standard and premium risk assessments only, you’ll get a comprehensive, state-by-state analysis based on your specific business activity. And with our premium assessment option, you’ll also get to meet with one of our tax directors to discuss your results and be recommended a detailed path forward.

The importance of understanding your nexus footprint

What is nexus — and why does it matter?

Sales and use tax compliance starts with understanding your company’s nexus footprint. Nexus refers to a connection between your business and a tax jurisdiction that creates a legal obligation to register, collect, and remit sales tax. Identifying where you have nexus is the first step in ensuring compliance — and helps you make informed decisions about when and how to register with tax authorities.
Illustration of a pie chart, tax document, and financial icons over a U.S. map, representing tax and financial data analysis.
Illustration of a pie chart, tax document, and financial icons over a U.S. map, representing tax and financial data analysis.

What is nexus — and why does it matter?

Sales and use tax compliance starts with understanding your company’s nexus footprint. Nexus refers to a connection between your business and a tax jurisdiction that creates a legal obligation to register, collect, and remit sales tax. Identifying where you have nexus is the first step in ensuring compliance — and helps you make informed decisions about when and how to register with tax authorities.

Why is nexus so tricky?

Nexus rules have become more complex in recent years. Traditionally, businesses needed a physical presence in a state to create nexus. But after the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., even online sales can trigger economic nexus — meaning you can have tax obligations without ever setting foot in a state. And that’s not all. Beyond physical and economic nexus, other business activities — like employing remote workers, attending trade shows, or working with third-party affiliates — can also establish nexus. Without a thorough analysis, it’s easy to overlook tax obligations, making noncompliance both more likely and more costly.
Illustration depicting tax compliance with a fine notice, warning symbol, percentage sign, Avalara logo, and a star representing success.
Illustration depicting tax compliance with a fine notice, warning symbol, percentage sign, Avalara logo, and a star representing success.

Why is nexus so tricky?

Nexus rules have become more complex in recent years. Traditionally, businesses needed a physical presence in a state to create nexus. But after the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., even online sales can trigger economic nexus — meaning you can have tax obligations without ever setting foot in a state. And that’s not all. Beyond physical and economic nexus, other business activities — like employing remote workers, attending trade shows, or working with third-party affiliates — can also establish nexus. Without a thorough analysis, it’s easy to overlook tax obligations, making noncompliance both more likely and more costly.

What’s next?

Once you identify where you have nexus, it’s time to act. Determining your obligations can feel overwhelming — especially if you’ve been operating in a state for years without realizing you owe taxes. Unpaid liabilities, penalties, and interest can quickly add up. Fortunately, there are ways to address past liabilities and reduce your exposure.

Take advantage of voluntary disclosure agreements (VDAs): Many states offer programs that limit the lookback period and reduce or eliminate penalties if you voluntarily disclose past tax obligations.

Act early to qualify: If a state contacts you before you apply for a VDA, you could lose eligibility and the opportunity to reduce penalties.
Illustration of a house, a scale, and tax-related icons over a U.S. map, symbolizing tax compliance and business solutions.
Illustration of a house, a scale, and tax-related icons over a U.S. map, symbolizing tax compliance and business solutions.

What’s next?

Once you identify where you have nexus, it’s time to act. Determining your obligations can feel overwhelming — especially if you’ve been operating in a state for years without realizing you owe taxes. Unpaid liabilities, penalties, and interest can quickly add up. Fortunately, there are ways to address past liabilities and reduce your exposure.

Take advantage of voluntary disclosure agreements (VDAs): Many states offer programs that limit the lookback period and reduce or eliminate penalties if you voluntarily disclose past tax obligations.

Act early to qualify: If a state contacts you before you apply for a VDA, you could lose eligibility and the opportunity to reduce penalties.

Assessment comparison chart

Choose the option that’s right for your business

Feature
Free Risk Assessment
Standard Risk Assessment
Premium Risk Assessment

Cost

Free

Free

$9,800

How to purchase

Free

Online

Speak to a sales rep

High-level economic nexus impact on your business

Y

Y

Y

Detailed assessment including reference to state statutes

Y

Y

Physical nexus analysis

Y

Y

Economic nexus lookback

1 year

5 years

Tax liability calculation

1-year, high-level estimation

Up to 5 years, details

Economic nexus start date determination

Y

Results consultation and recommendations

Y

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Frequently Asked Questions

Frequently asked questions

There are several ways to create sales tax nexus , including having ties to in-state affiliates. Yet the most common ways businesses establish nexus are through physical presence or economic activity in a state.

https://www.avalara.com/blog/en/north-america/2022/09/states-with-no-sales-tax-what-you-need-to-know.html

Economic nexus is newer than physical presence nexus; a physical connection to a state was required for nexus until the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc. (June 21, 2018). Today, a remote business can establish nexus solely through economic activity in 45 states, the District of Columbia, and some local jurisdictions in Alaska. All economic nexus laws provide an exception for small sellers — those selling below a distinct economic nexus threshold. Since each state’s threshold is unique, businesses must constantly monitor sales into different states to determine whether they’ve met the economic threshold. It’s a task that requires careful attention. Fortunately, you don’t have to navigate these complexities on your own.

The standard Avalara Sales Tax Risk Assessment offers a detailed analysis of your sales tax obligations. By completing a sales tax nexus questionnaire, you’ll learn where you likely already have sales tax nexus and where you’re most at risk of establishing it. Knowing where you could be at risk can help you avoid costly compliance errors. Once we know what you sell, how much you sell, and where you sell it, you’ll receive a comprehensive written report detailing your sales tax liability risk. You’ll also have the opportunity to consult with a nexus specialist, allowing you to ask questions and better understand your specific sales tax risk.

https://www.avalara.com/blog/en/north-america/2018/05/debunking-4-myths-about-voluntary-disclosure-agreements.html

Revenue generated from audit penalties can help bolster state coffers during periods of lower sales tax collection. In recent years, consumers have been purchasing fewer physical products and more services and intangible goods, resulting in a shrinking sales tax base for states. This shift is forcing many states to look for alternate ways to make up the difference . Digital advertising, data collection, and services are options some states are looking at taxing to help bring in more revenue. An alternative is for states to increase scrutiny on existing businesses that may not be fulfilling their nexus obligations to collect and remit. If you’re selling into states where you’re not registered, you’re at risk of developing an obligation to collect and remit sales tax. The more time passes, the greater your risk of a sales tax audit, penalties, and interest. A sales tax risk assessment helps eliminate uncertainty by identifying where you likely have sales tax nexus.

Many states offer voluntary compliance programs that offer taxpayers certain benefits for proactively disclosing prior tax liabilities as part of a VDA between a company and the state. In exchange for voluntarily disclosing information, states will limit the number of years of outstanding liabilities and reduce or eliminate penalties. If, on the other hand, a state contacts you about outstanding tax liabilities prior to you applying for a VDA, they will not allow you to participate in the program and receive the benefits. An Avalara voluntary disclosure agreement helps businesses proactively navigate state-specific requirements to address outstanding tax liabilities and get on the right path for compliance. If you choose the Premium Risk Assessment, a tax director will discuss this option with you in detail.

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