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States Update Nexus Thresholds in Response to Wayfair Act

Recently, the Texas Comptroller’s office proposed amendments to Rule 3.586 to implement the decision in Wayfair for franchise tax reports due on or after Jan. 1, 2020. The amendment proposes an economic nexus threshold of $500,000 gross receipts in Texas.

Under the proposed rule, a foreign taxable entity would be doing business in Texas on the earliest of:

  1. The date it has physical presence in the state (the proposed rule sets forth a list of activities that constitute a physical presence nexus)

  2. The date it obtains a Texas use tax permit, or

  3. The first day of the federal accounting period it has Texas gross receipts from business that is done in Texas and exceeds $500,000.

The proposed rule is available for review and comment from constituents in Texas until the end of October. The proposed amendment can be adopted as early as October 27, 2019.

Kansas recently adopted the most aggressive economic nexus law enacted to date, stating that all sales made into Kansas are taxable at dollar one, which is remarkable because most states have a nexus threshold beginning at $100,000. 

These proposed and new laws are important to note, as states will continue to apply Wayfair in different ways to draw in as much revenue as possible to state budgets. Businesses need to stay vigilant in tracking these various new laws to determine whether to register and begin collecting and remitting tax to avoid penalties.

Our SALT (sales and use tax) team can help ensure you have the right systems in place to help you remain in compliance with changes in state and local tax laws.

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