Remote Employees and Sales Tax Nexus: What Employers Need to Know (2026)
Last updated: April 2026
Researched by the NexusFlag Research Team
A remote employee working from a state creates physical nexus for the employer in that state, potentially triggering sales tax collection obligations even if the company has no office, warehouse, or customers in that state. Physical nexus from employees requires no revenue threshold — the employee's presence alone is sufficient.
How Remote Employees Create Physical Nexus
Sales tax nexus has two main types: economic nexus (based on revenue) and physical nexus (based on presence). Remote employees fall under physical nexus, which has existed in US tax law since long before the Wayfair decision established economic nexus in 2018.
Under the physical presence doctrine, a company has nexus in any state where it maintains a physical presence — an office, warehouse, inventory, or employee. A remote employee working from their home in Ohio is, legally, a representative of your company physically present in Ohio. That presence triggers nexus for your company in Ohio the same way an office in Columbus would.
Key distinction: Economic nexus requires crossing a dollar threshold — typically $100,000 in annual revenue. Physical nexus from a remote employee requires nothing except the employee's presence. Your first day with a full-time employee in a new state is the day you have nexus in that state.
What creates physical nexus
- Full-time employees working from home
- Part-time employees working from home
- Company-leased office space
- Inventory stored in the state
- A sales representative regularly soliciting business
- Contractors performing core business functions
What generally does not create physical nexus
- Employees traveling through the state briefly
- Attending a trade show (in most states)
- Using a third-party fulfillment center you don't control
- Pure independent contractors with no regular solicitation
- Employees in states with no sales tax (OR, DE, MT, NH, AK)
- Temporary presence under 30 days (varies by state)
Which States Consider Remote Workers Nexus-Creating
The vast majority of states with sales taxes treat remote employees as nexus-creating. The table below summarizes current rules. States with no sales tax are marked separately — nexus is irrelevant there for sales tax purposes.
Remote Employee Nexus Rules by State (2026)
| State | Remote Employee Rule |
|---|---|
| Texas | Creates nexus |
| California | Creates nexus |
| New York | Creates nexus |
| Washington | Creates nexus |
| Ohio | Creates nexus |
| Pennsylvania | Creates nexus |
| New Jersey | Creates nexus |
| Illinois | Creates nexus |
| Georgia | Creates nexus |
| North Carolina | Creates nexus |
| Virginia | Creates nexus |
| Colorado | Creates nexus |
| Arizona | Creates nexus |
| Tennessee | Creates nexus |
| Connecticut | Creates nexus |
| Massachusetts | May not create nexus |
| Oregon | No sales tax |
| Delaware | No sales tax |
| Montana | No sales tax |
| New Hampshire | No sales tax |
| Alaska | No sales tax |
| Minnesota | Creates nexus |
| Wisconsin | Creates nexus |
| Indiana | Unclear |
| Michigan | Creates nexus |
Rules based on state Department of Revenue guidance as of April 2026. Laws change; verify before making compliance decisions. States not listed should be treated as nexus-creating until verified otherwise.
Employee vs. Contractor: Does the Distinction Matter?
Yes — the employee vs. independent contractor distinction matters significantly for nexus purposes. Full-time employees almost always create nexus. Independent contractors are more nuanced.
Full-time and part-time employees
Always creates nexusEmployees on your payroll create physical nexus in their home state from their first day. This is the clearest case — there is no ambiguity, and no minimum hours or revenue requirement applies.
Independent contractors — software development
Generally does not create nexusA contractor who builds features for your product, works remotely, uses their own tools, and has multiple clients generally does not create nexus for your company. The key factors are lack of control, independent operation, and multiple-client relationships.
Independent contractors — sales and customer success
May create nexus — evaluate carefullyA contractor who regularly solicits your customers, maintains a territory, or performs functions that look like a sales employee's job may create nexus under 'sales solicitation' rules. The economic substance matters more than the contractor label.
Misclassified employees
Treated as employees if reclassifiedIf a state determines that someone you classified as a contractor is actually an employee for employment law purposes, that person is also an employee for nexus purposes. States that are aggressive about worker classification (California, Massachusetts) will apply the same analysis to your nexus position.
The "Temporary Presence" Exception
Most states have some version of a temporary presence exception: an employee working in the state for fewer than a set number of days — commonly 30 days — may not create nexus for that calendar year. The exact threshold varies by state.
This exception does not apply to remote employees. The temporary presence exception was designed for business travelers and salespeople who visit states occasionally for meetings, trade shows, or client calls. A full-time remote employee who works from home in Ohio every single weekday is not temporarily present in Ohio — they are permanently present. Temporary presence exceptions provide no shelter for standard remote employment situations.
Where the exception does apply: A salesperson who flies to a state for a 3-day conference, then returns home, has been physically present in that state for 3 days. If they do this a few times a year totaling fewer than 30 days, some states would not treat that as nexus-creating. A remote employee working daily from that state is an entirely different situation.
COVID-Era Temporary Waivers: All Expired
In early 2020, as employees suddenly began working from home across state lines, several states issued emergency guidance stating that the temporary displacement of employees due to the pandemic would not create new nexus for their employers.
Those waivers have expired. Every state that issued COVID nexus relief has since returned to standard physical presence rules. Companies that assumed their COVID-era workforce arrangement was still covered by a waiver may have had unrecognized nexus obligations for 2022 and later.
States that issued COVID nexus waivers and have since returned to standard rules include Massachusetts (waiver expired September 2021), New Jersey (September 2021), Pennsylvania (June 2021), and Minnesota (June 2021). If you hired remote employees in these states and relied on a waiver, your nexus position should be reviewed.
Practical Steps for Employers with Remote Workers
Know where every employee lives before you hire
Ask candidates where they plan to work from during the offer process. Each new state is a new nexus event. If adding Ohio to your nexus footprint is worth the compliance cost, great. If not, factor that into the hiring decision. Finding out after onboarding is avoidable.
Add each employee's state to your nexus tracking
Physical nexus from employees is immediate and has no revenue threshold. The moment you have an employee in a new state, add that state to your compliance list. Register with the state's Department of Revenue and check whether your product is taxable there.
Audit your current remote workforce
If you've been growing a distributed team and haven't been tracking nexus, do a full audit. Pull a list of every employee's state of employment. Compare against your current nexus registrations. Any state with an employee and no registration is an exposure that needs resolution.
Consider voluntary disclosure if you're behind
If you discover you've had employees in states where you never registered, voluntary disclosure agreements (VDAs) allow you to come forward, pay back taxes with limited lookback, and waive penalties. VDAs are far better than waiting to be audited.
Monitor ongoing — NexusFlag tracks physical nexus too
NexusFlag's dashboard lets you add states where you have physical nexus manually — even if you haven't crossed the economic threshold. This gives you a complete picture of your total nexus footprint, not just economic nexus.
Track physical and economic nexus in one place
NexusFlag monitors economic nexus thresholds automatically and lets you manually add states where you have physical nexus from employees. Get a complete view of where you owe.
Frequently asked questions about remote employees and nexus
Does a remote employee always create nexus?
In most states, yes — a full-time remote employee creates physical nexus for their employer on their first day of employment, with no revenue threshold required. A handful of states have issued guidance that employees working remotely due to the employee's personal preference (rather than business necessity) may not create nexus for the employer, but this exception is narrow and not universally available. Treat every remote hire as a nexus event until you verify that state's current rules.
Do independent contractors create sales tax nexus?
Generally no — independent contractors do not create physical nexus the way employees do, provided they are genuinely independent. However, contractors who regularly solicit customers on your behalf, maintain a space for your use, or perform activities that are closely tied to your core business operations may create nexus in some states. The classification also matters: states that reclassify a contractor as an employee for payroll purposes will typically also treat that person as an employee for nexus purposes.
My remote employee is in a state where I have zero customers. Do I still have nexus?
Yes. Physical nexus from an employee is not contingent on having customers or revenue in that state. Your employee's presence alone creates nexus. You will need to register with the state's Department of Revenue once you have nexus, even if your current sales to customers in that state are zero and SaaS is the only product you sell.
What does the 30-day employee threshold mean?
Some states provide a 'temporary presence' exception: employees working in the state for fewer than a specified number of days — often 30 days in a calendar year — may not create nexus. This rule was designed for business travelers and salespeople who visit a state occasionally, not for remote employees who work from home in the same state every day. A full-time remote employee working from home does not qualify for this exception.
Are COVID-era nexus waivers still in effect?
No — the vast majority of COVID-era temporary nexus waivers expired in 2020 or 2021. Several states (including Massachusetts, New Jersey, and Pennsylvania) issued temporary guidance stating that employees forced to work remotely during the pandemic would not create new nexus for their employers. Those waivers have long since expired. If your remote workforce grew during or after the pandemic, your nexus exposure should be reassessed using current rules.
Which states do NOT create nexus from remote employees?
There is no simple list — states do not generally advertise that they exempt remote employees from nexus creation, and the analysis depends on the nature of the employee's work, the employer's other connections to the state, and the state's current administrative guidance. The states with no sales tax (Oregon, Delaware, Montana, New Hampshire, Alaska) are the cleanest exceptions — no sales tax means no nexus obligation regardless of who lives there. For all other states, assume nexus until verified otherwise.
Disclaimer: NexusFlag provides informational data about state sales tax nexus rules — not tax, legal, or employment law advice. Nexus rules vary by state, change over time, and depend on the specific facts of each employer-employee relationship. Consult a qualified sales tax professional or employment attorney before making compliance decisions based on remote employee situations.