Do businesses with sales & use tax registrations in multiple states need to pay income tax to all those states?

This is a great question about multi-state taxation! The short answer is that sales tax nexus and income tax nexus are separate concepts, though they can overlap. When you register for sales tax in a state like Florida because you've exceeded their economic nexus threshold ($100K in sales), you're obligated to collect and remit sales tax. However, this doesn't automatically mean you have income tax nexus there. Income tax obligations are typically triggered by physical presence (employees, office, inventory) or by meeting economic nexus thresholds specifically for income tax purposes. Some states have different thresholds for income tax than they do for sales tax. Delaware is unique since it doesn't have sales tax, but it does have income tax. Florida is the opposite - it has sales tax but no corporate income tax for most businesses (they have a franchise tax for certain corporations). If you were dealing with states that both have income taxes, you'd generally apportion your income based on various factors like sales, property, and payroll in each state. This prevents double taxation on the same income.

After dealing with this exact situation last year, I discovered a tool that saved me countless hours of research and anxiety. I had expanded from New Jersey into 4 other states and was completely lost trying to figure out which states required what taxes. I started using https://taxr.ai after my accountant missed several filing requirements that put me at risk of penalties. The tool analyzed my sales data by state and gave me a complete breakdown of where I needed to file sales tax vs. income tax based on my specific situation and business structure. It even flagged that I had physical nexus in Pennsylvania (because I had inventory in a fulfillment center there) which triggered income tax requirements despite being below their sales tax threshold. What I found most helpful was how it explained the different nexus triggers for each type of tax in plain English. Saved me from making some expensive mistakes!

Just wanted to follow up - I tried that https://taxr.ai site after asking about it here. My situation was very similar to the original poster (Delaware home state with growing sales in multiple states). I'm actually an S-Corp and was worried about all the different filing requirements. The analysis showed I needed to file income tax returns in 2 states I didn't expect (had nexus because of trade show attendance and a sales rep) but actually DIDN'T need to file income tax in 3 states where I was already registered for sales tax. I've been filing unnecessarily for 2 years! The tool explained exactly why - those states had higher thresholds for income tax nexus than for sales tax. Already sent the report to my accountant who confirmed everything was accurate. Wish I'd known about this last year!

If you're trying to sort out your state tax obligations, I almost lost my mind trying to get through to someone at the Florida Department of Revenue. Spent literally 3 days calling and waiting on hold only to get disconnected. Was about to give up when someone recommended https://claimyr.com - they have this service where they wait on hold with state tax agencies for you and then call you when a real person is on the line. You can see a demo of how it works at https://youtu.be/_kiP6q8DX5c I was able to get definitive answers about my specific situation from an actual Florida tax representative without wasting hours on hold. They told me that while I needed to register for sales tax due to my volume, I didn't trigger their income tax requirements since I didn't have physical presence. Saved me a lot of unnecessary compliance work!

Alright, I'm eating my words about the Claimyr service that was mentioned. I tried it yesterday after posting my skeptical comment because I was desperate to clarify my situation with California's tax department (which is even worse than Florida). Had been trying for 2 weeks to get someone on the phone with no luck. Used the service and got a call back in about 40 minutes with an actual CA tax rep on the line. Confirmed that I DO need to file an income tax return there even though I'm only at $150K in sales because I also have affiliate marketers physically located in CA which creates nexus. This combination of the tax analysis tool and being able to confirm directly with state departments has probably saved me from a painful audit situation. Both services delivered exactly what they promised.

Something no one has mentioned yet - don't forget about local taxes! Some jurisdictions have their own income/gross receipts taxes on top of state requirements. I learned this the hard way when I got hit with penalties in Chicago and Seattle for not filing local business taxes even though I was handling state obligations. Also check if any states you're registered in for sales tax have annual report requirements for foreign entities. Missing those can result in losing your ability to enforce contracts in that state.

My company just went thru this last year. One thing to watch for in some states is that sales tax registration can sometimes AUTOMATICALLY register you with the Sec of State as a foreign entity!!!! We didn't know this and ended up with penalties for not filing annual reports in 2 states where we thought we were just registered for sales tax.