Contents
1) Nexus evolution: Wayfair changed everything
Post-Wayfair, economic nexus thresholds became the norm for sales tax, and by 2025 that logic has expanded into income/franchise/gross receipts regimes. A key operational trend is that many states are removing “transaction count” thresholds and keeping dollar thresholds only—simplifying audits and expanding coverage. :contentReference[oaicite:1]{index=1}
Special watchout: P.L. 86-272 is narrowing (especially for e-commerce)
States increasingly treat certain “internet activities” (support chat, cookies for non-solicitation functions, etc.) as unprotected activity that can create income tax nexus—even when a business sells only tangible goods. :contentReference[oaicite:2]{index=2}
2) Sourcing & apportionment: where your customer sits matters
Once you have multistate nexus, your tax bill often hinges on (a) apportionment formula (single-sales-factor is widespread) and (b) sourcing rules for services and intangibles. The major trend is the shift from cost-of-performance to market-based sourcing—creating real double-taxation risk for service/SaaS businesses headquartered in COP states selling into MBS states. :contentReference[oaicite:3]{index=3}
Throwback/throwout rules
If you’re not taxable in the destination state, origin states may “throw back” sales (or “throw out” receipts), increasing your home-state sales factor and tax. :contentReference[oaicite:4]{index=4}
Entity classification still matters
Partnership-style flow-through of apportionment factors vs entity-level corporate apportionment can change outcomes—especially for unitary groups and throwback computations. :contentReference[oaicite:5]{index=5}
3) Privilege taxes: the “pay-to-play” floor cost
Even when income is low (or negative), LLCs can owe state-level entity taxes and fees. The report highlights how these regimes vary dramatically by state: California’s dual LLC tax + fee system, Texas franchise tax filing obligations even under “no tax due” thresholds, Ohio’s CAT reform raising exclusions, and Washington’s B&O rate changes and surcharges. :contentReference[oaicite:6]{index=6}
Why this matters
These taxes drive cash planning, legal entity footprint decisions, and pricing—especially for low-margin businesses where gross receipts taxes behave like a “margin compressor.” :contentReference[oaicite:7]{index=7}
4) PTE elections: powerful, but deadline-driven (and politically fragile)
PTE (PTET) elections became widespread as a workaround to the federal $10,000 SALT cap. By 2025, dozens of states (plus NYC) have elective PTE regimes, but the mechanics and deadlines vary—some require early-in-year elections or specific estimated payments to keep the election valid. :contentReference[oaicite:8]{index=8}
The 2025 cliff: SALT cap sunset uncertainty
Many state PTE regimes include sunset provisions tied to the federal SALT cap. If federal law changes after December 31, 2025, state elections (and the benefit of prepaying) can shift materially. Timing of cash-basis payments becomes part of the strategy. :contentReference[oaicite:9]{index=9}
5) Compliance frontiers: withholding, composite returns, and transparency
Multistate LLC compliance is more than income tax returns. The report emphasizes: nonresident withholding regimes, composite return constraints and rate tradeoffs, and a new era of ownership reporting (federal BOI/CTA plus state-level “mini-CTAs” like New York’s upcoming LLC transparency requirements). :contentReference[oaicite:10]{index=10}
Operational rule
Build a “nexus + elections calendar” and treat it like payroll: predictable, recurring, and auditable. Most SALT penalties come from missed mechanics—not from the underlying tax rate. :contentReference[oaicite:11]{index=11}
Bottom line
In 2025, state tax exposure is determined by customer footprint, digital activity, and elections timing. Winning isn’t about finding a “best state”—it’s about building repeatable compliance systems: nexus tracking, correct sourcing, proactive privilege-tax budgeting, and disciplined PTE election execution. :contentReference[oaicite:12]{index=12}