Expanding into a new state brings opportunity—but also complex multi-state tax compliance requirements business owners need to understand.
Moving your business into a new state means paying extra fees and paperwork. You’ll need to register as a foreign entity, get new state tax IDs, and figure out how to stay in compliance with your new state’s tax law.
The IRS provides a database of state government websites. You can use that to learn more about what new businesses need to do in order to expand to a new state, checking on specific requirements of the state you’re interested in expanding to.
However, it can easily get complicated at a time when you already have a lot to stay on top of. Hiring a CPA year-round will help you stay ahead of your growing tax burden. They can even help you avoid common audit risks, finding areas where you might already be noncompliant without even realizing it.
Here’s what to know about the complications that arise from expanding your business to new states.
Multi-State Tax Complexity: What to Keep in Mind
Your company’s legal requirements get significantly more complex whenever you expand to a new state. On the tax side, you’ll need to look into your new state’s laws around:
- Income tax;
- Sales & Use tax;
- Employment and payroll tax;
- Property tax;
- Franchise tax; and
- Excise tax.
Each state handles these taxes differently. Not every state will charge each of these taxes (for example, there are eight states with no income tax), and what you pay depends on your business’s size, classification, and products.
Your tax payment schedule will change depending on what state you expand to. Some states require annual tax payments, while others require quarterly or even monthly payments. Accidentally sticking to the wrong schedule could leave you with extra fines for late payment. Visiting your state’s Department of Revenue website can help you learn more about what’s expected of you as a business owner.
If you hire a CPA before you move to a new state, you can work together to make a plan for tackling your new tax requirements. They can help you with everything from payroll tax compliance to even just knowing if your company qualifies as a small business — and what that means for your taxes.
OBBBA Created New State Tax Complications
The One Big Beautiful Bill Act made sweeping changes to tax law when it came out in July 2025. Several of these changes are good news for businesses, but they also increase the complexity of state taxes — especially as states make major changes to their own tax law in response.
One major OBBBA tax change lies in Section 179 of the tax code. Businesses are now allowed to fully deduct certain equipment and property investments the same year those investments were made; previously, companies had to spread those deductions across several years.
You can read the full, updated text of Section 179 here.
Many states elected to decouple from the Section 179 changes. Some states do not offer full expensing for machinery and equipment; a CPA can run through an OBBBA compliance review checklist with you to check this and other OBBBA changes, potentially shaving quite a bit off your tax burden.
What Does Nexus Mean for Your Business?
“Nexus” refers to the connection a business has to a certain area. If you have nexus in a state, that means that state is allowed to tax you. There are two basic types of nexus, each based on a different type of tax:
- Sales tax nexus means you’ll have to collect and pay sales tax to the state you operate in. Generally, your customers are paying this tax, not your company.
- Income tax nexus means you have to pay a tax on the profits you make in that state. Your company (or its owners) has to pay this tax.
You don’t need a physical presence in a state to establish a nexus there. Physical presence used to be a requirement for nexus, but the 2018 case South Dakota v. Wayfair made major changes to how nexus worked to account for the growing popularity of e-commerce.
Physical location is a nexus trigger, but there are others — having remote employees that work in a state, providing services to a state, or selling a certain amount of goods in a state — that don’t require your business to have a footprint in a state at all.
Each state has different ways they determine nexus. If you’re under the nexus threshold for one state, don’t assume you’re under the threshold for other states with similar sales.
Each state may have different ways to pay income taxes created by having nexus. This is especially true for out-of-state (nonresident) owners. States may require or allow:
- Payments on behalf of nonresident owners
- Composite tax returns at the company level, meaning owners are not required to file state returns.
- Pass-Through Entity Tax (PTE or PTET) elections, allowing the company to pay tax on behalf of its individual owners. The required timing of such an election can vary greatly by state.
It’s possible you could have nexus in states you aren’t aware of. Ideally, you should check the nexus requirements of each state you buy or sell in to make sure you’re meeting your tax requirements in each state.
A CPA can help you go through your finances and identify where you might need to update your sales or income tax requirements. This will help you avoid audit risk down the line, which could come with hefty fines and penalties.
CPAs can also help you figure out your apportionment method, which will also differ depending on the states you have nexus in.
Limiting State and Local Tax Exposure
CPAs aren’t just helpful for figuring out what taxes you owe. They can also help you limit your state and local tax, or SALT, exposure through identifying deductions you can utilize or even helping you legally restructure your company.
For example, OBBBA increased the cap on the SALT deduction, which allows individuals to include the state and local taxes they paid as itemized deductions against their federal tax burden. For those individuals impacted by the SALT limitations, it may be worth making a Pass-Through Entity Tax (PTE or PTET) election to pay the income taxes at the company level, reducing the net income taxed to the owners.
As long as you hire a CPA early enough in your expansion process, they can even help you identify qualified opportunity zones (QOZs) to move your business to. QOZs provide tax benefits to companies that invest in economically distressed areas.
Business Structure Impacts Tax Liabilities
Your company’s legal structure makes a huge difference in what taxes you pay. S Corporations pay different taxes than C Corporations; for example, C Corporations might have to deal with double taxation on earnings, while S Corps generally don’t. But there are stricter rules around what S Corps can and can’t do.
CPAs can help you make the right choice for your company. They’ll also lead you through the corporate restructuring process if you decide to make a change.
Expand Without Worry with Landmark CPAs
Understanding multi-state tax compliance is critical as your business grows across state lines, but you don’t need to tackle corporate expansion alone. Landmark CPAs can provide expert guidance on every step of expanding your business, from deciding where to go, to creating audit risk assessments, to handling year-round tax compliance.
Contact Landmark today to make sure you grow your business the right way.
