Sales tax compliance for startups: when you owe it, and what outsourcing costs

By Solomon Wiesen, editor. Updated October 2026. Editorial standards | How this site is funded

A startup owes sales tax in a state once it has nexus there, meaning a physical presence or sales above that state’s economic threshold. Outsourcing the work costs from $75 per return at the per-filing services to $799 per state per year at Avalara, and a company that sells in one state can skip it and file its own return.

When you owe sales tax at all

Physical nexus is the old rule and still applies. In New York, Tax Bulletin ST-175 says you must register if you keep a place of business in the state such as an office or warehouse, solicit sales through employees or independent contractors there, or deliver taxable goods in your own vehicles 12 or more times a year.

Economic nexus dates from June 21, 2018, when the Supreme Court decided South Dakota v. Wayfair and dropped the requirement that a seller be physically present before a state can make it collect. South Dakota’s law applied to sellers with more than $100,000 of sales into the state or 200 or more transactions a year. Most states copied the $100,000 figure, as the Sales Tax Institute’s state chart shows. California and Texas use $500,000. New York requires both conditions: more than $500,000 in sales of tangible personal property delivered into the state and more than 100 such sales, measured over the preceding four sales tax quarters.

Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska lets localities charge their own, according to the Tax Foundation.

The New York rules

Before your first taxable sale you need a Certificate of Authority. Tax Bulletin ST-360 tells you to apply through New York Business Express at least 20 days before you begin business, and you can’t legally make taxable sales until the certificate arrives. Selling without one carries a penalty of up to $500 for the first day and up to $200 for each day after, to a maximum of $10,000.

SaaS is taxable in New York. Tax Bulletin ST-128 treats prewritten software as tangible personal property however it reaches the customer, and states that selling a New York purchaser a license to remotely access software is subject to state and local sales tax. Software designed and built to one customer’s specifications is exempt. Because the state classes prewritten software as tangible personal property, an out-of-state SaaS company should assume its New York subscriptions count toward the $500,000 test, and confirm that with the Tax Department or an adviser before relying on it.

New vendors file quarterly, and Tax Bulletin ST-275 requires a return for every period, including one with no sales. Returns are due 20 days after the period ends, and you move to monthly filing once taxable sales reach $300,000 in a quarter. The penalty for filing late with tax due is 10% of the tax for the first month plus 1% for each additional month, up to 30%, with a $50 minimum. A late return with no tax due costs $50. Those figures come from Tax Bulletin ST-805, as of October 2026.

What outsourcing means

Two different products are sold under this label. The first is software that calculates tax on each invoice and files returns from your sales data; you still decide where to register and you open the state’s mail. The second is a managed service that registers you, files, remits and answers notices. Some software plans now include parts of the second (Avalara’s covers notice handling), so read what each plan includes instead of trusting the category. Payroll companies such as ADP and Gusto handle payroll tax, which is a separate obligation.

8 providers and what they publish

These are list prices from each company’s own site as of October 2026.

Run the arithmetic before you take a demo. A company registered in five states and filing quarterly has 20 returns a year. At Numeral that is $1,500, plus $750 in the first year for the registrations. Avalara’s annual plan comes to $3,995 for the same five states, and Anrok’s to $6,000. Stripe Tax Complete at $90 a month looks cheapest until you count the filings: 20 a year puts you on the $1,000-a-month tier. Per-filing pricing wins for a company in a handful of states, and I’d make the quote-only firms beat it in writing. If you already pay a bookkeeper or an accounting firm, ask there too; Bookkeeper360, for one, lists sales tax service from $125 a month, and other options are in the bookkeeping rundown.

When it isn’t worth paying for

If you sell only in New York, you have one registration and four returns a year, and the return is built from numbers your ledger already holds, so do it yourself. The same goes if you have no physical presence in other states and sit under each one’s economic threshold, because then you have nothing to file there. Use the free monitoring tier from Numeral or Kintsugi to watch the thresholds, and start paying when the second or third registration arrives. Whoever files, the records stay your problem: New York requires vendors to keep sales records and exemption certificates for at least three years. The other taxes a new company deals with are on the startup taxes page.

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