Starting the Year off Right (2026)
Michael J. Fleming is the founder and president of Sales Tax and More, a full-service consulting and solutions firm with a passion for state tax. He is one of the country's leading authorities on sales tax issues such as consulting and research, registrations, returns, nexus, drop-shipping, eCommerce, and service providers.
Michael is a renowned writer and speaker, and he regularly presents on webinars. He is also the host of the Sales Tax and More Podcast, where he shares his wisdom and learnings with his audience in order to help them navigate the tricky world of taxes.
In this episode…
Mike Fleming and Ellie Moffat talk about how to start your year off right.
Here’s a glimpse of what you’ll learn:
When it comes to a nexus footprint, what should you be doing at the new year?
What does a lot of states dropping their transaction thresholds last year mean for starting this year off with your sales tax plan?
How can you find out where you should deregister? Is your sales tax partner helping you with that? What should you be looking at?
What should be considered for your 2026 tax plan?
Connect with Michael
Episode Transcript - Audio Version
[00:00:00] Welcome to Sales Tax and More your go-to resource for all things state tax related. Now here is your host, Michael Fleming.
Michael Fleming: Hi, Mike Fleming here, founder of Sales Tax and More, and today's co-host of the Sales Tax and More Podcast where we talk about everybody's favorite topic, which is of course, sales tax. Now, today we're gonna talk about starting the new year off, right. But before we jump into this, let me introduce you to my co-host, Ellie Moffat.
Ellie Moffat: Hi, everyone. Great to be here and we're happy to be in 2026 and doing this podcast episode for you guys.
Before we get started, I'm gonna do a quick introduction for Sales
[00:01:00] Tax and More. So we are a full service consulting and solutions firm. We have a really great team here of experienced tax professionals who are very dedicated to fulfilling your state tax and related needs. So we do a lot of sales tax returns, sales tax registrations, consultations, research exemption certificate management, audit defense, and like our name states more.
So if you have questions about our services, please reach out. We would love to hear from you, and we would love to work with you as well. And please like and subscribe to this podcast as well. First question here, Mike. It's a new year that typically means we're gonna talk about a nexus footprint for people.
So when it comes to a nexus footprint, what should someone be doing at the new year?
Michael Fleming: Yeah, great question. And this is something we talk about the end of every December or the beginning of every January. When we talk about a nexus footprint, it's just where you have this link or connection that could require you to collect sales tax per the state.
[00:02:00] And where you may have to get registered or where you may no longer have this link or connection that we call nexus with the state and you can deregister. The reason we say do it in January or February. Number one, it's a new year. You wanna start the new year off right.
But number two is the way that the states look at these economic nexus calculations. So you've got some states that say everything's based on the previous calendar year. And if it's a state that says previous calendar year like Florida, you just look at all of your sales in the last 12 months and if they're over a hundred thousand dollars, then the state believes that you should get registered and collect and remit their sales tax if what you're selling is taxable. That's one way that states do it. So that's why this is a perfect time of year to do it. You don't wanna wait until January of next year or you don't wanna wait till
[00:03:00] July of this year because right now you don't have any exposure.
But the longer you wait, the more exposure could build up. And if the state finds you, they can be going back after the last six months worth of, if you don't get around to it till July or even next January, 6 to 12 months of exposure that you have. So you wanna avoid that.
All right. The second reason is the second group of states, again, they look at preceding 12 months. Or current year. So you may not have checked this during the current year last year. So you gotta look at last year to see if you crossed a hundred thousand dollars. And you may want to go back into last year.
You already may have some exposure. You don't want that exposure growing. So you want to nip it in the bud. You want to get it taken care of as soon as possible. If you crossed a hundred thousand dollars in the state of
[00:04:00] illinois in July of last year. You had nexus since then and Illinois is a very aggressive state.
It's not a matter of if they find you, it's a matter of when they find you. So you've got six months worth of exposure already. So that's something that you generally want to take care of. If you reached it in December, getting registered in January is perfectly fine. I think Illinois actually gives you 60 days to go ahead and get registered once you cross the threshold.
You'll be perfectly fine, but that's why we want to do this at this time of year. Illinois, by the way, might have been a bad state. Illinois, their look lookback period is quarterly. So they use a rolling 12 month period. So that's again, you still wanna check it now because the end of the fourth quarter was December.
This is when you're supposed to be checking it for the state of Illinois also. But that's the whole reason we wanna do this in
[00:05:00] January before our exposure gets any worse and we wanna start the new year off.
Ellie Moffat: This is not a great thing to procrastinate. Your to-do list is long. Don't let this one fall too far down the list is what we're saying.
Michael Fleming: Yeah. And actually laws change. Sometimes they may have lowered the thresholds or sometimes they may have eliminated the threshold. So sometimes you may need to get registered in more states. Sometimes when you're doing this exercise, you can actually deregister in a state.
Ellie Moffat: Yes, and that is actually the perfect segue to our next thing we wanna talk about here, Mike. So we saw a lot of states drop their transaction thresholds last year. What does that mean for people starting the year off with their sales tax plan?
Michael Fleming: Yeah. And when states drop their transaction thresholds and there's a move away from transaction thresholds. Not all states have dropped them.
Some states, like the state of New Jersey, it's still very big alive and you gotta worry about it. As soon as we
[00:06:00] say that some of the states are dropping their transaction threshold, some people take it to mean, oh, I don't have to worry about that anymore. No, it doesn't mean that. It means that in certain states you don't have to worry about it anymore. And if you'll already registered, there are a number of states that dropped them at the beginning of last year or in the middle of last year. You could have deregistered at that point, but take a look at it now and if you're only reason you were registered was because of the 200 transaction threshold you can deregister at this point.
Now, Illinois, they did drop theirs last year, but they said you could not deregister until January, so their 200 transaction threshold is gone. But you needed to keep collecting until the end of the year. Now you can deregister. Again, January, very important time sometimes because the state says you couldn't do it till now and sometimes because you just didn't get
[00:07:00] around to doing it during the year.
So yes, you can deregister in a number of states if you don't think that you're gonna go over the threshold this year. Maybe you've got $30,000 in sales, you just had a lot of transactions. That's where it makes sense to deregister. But if you've got $98,000 in sales last year, and you're going to go over a hundred thousand dollars this year, sometimes it makes sense to stay registered because deregistration is a process often harder than registering.
And then if you go over it, you have to get registered again, which again is a process. So you're gonna actually pay more money getting de-registered and then registered again. So you gotta look at your own situation. Does it actually make sense? Am I gonna have to register at the end of this year or the middle of this year?
But again, if you were only registered because you have a lot
[00:08:00] of small dollar amount, high number of transactions then go ahead and get deregistered. Yeah. Why be registered if you don't have to and you're never going to, or it's gonna be years before you have to get registered again.
Ellie Moffat: And Mike, this might not be a good question, so if it's not, then let's take it out here.
But what I'm wondering for the people is who's keeping track of where people should deregister? How can people find out that information? Is their sales tax partner helping them with that? What should people look at?
Michael Fleming: It depends. So sometimes, you've got companies out there that have software and everyone tells you, oh, our software is great. But I have yet to see a software out there that is granular enough to give you all the information. Avalara has software, but sometimes you don't input all of your information 'cause there are some states that actually count marketplace
[00:09:00] sales.
So since Amazon is actually collecting the sales tax, why upload your Amazon sales into Avalara? So when Avalara is telling you, oh, you only need to register in these states, it's based upon the data that they have. It's not giving you a full picture. With Shopify, it's just looking at raw numbers. It's not looking at exempt sales or anything along those lines or marketplace sales. With a company like Shopify, more often than not, it's telling you to get registered in places where you don't need to be. So that software is good as a red flag, all right.
It reminds you that you need to be looking at these things. But before I go out, do anything that any software is telling me, I gotta look at my own facts. Do my facts actually fit what the software is telling me? A lot of times people come to us and say, hey, I need to get
[00:10:00] registered in 20 states.
And, one of our salespeople will say, why? Because Shopify's telling me that I need to be registered in these 20 states. Then, the sales person says, why don't you let us do a data review, which is a type of nexus review. And after we do this data review, which I believe the fee on that is $795 or so, we come out, we not only tell you where you currently have nexus, but how best to move forward.
We make recommendations. Is a VDA your best strategy to move forward? Is a prospective registration? In other words, just registering on a going forward basis. Is a historical registration the best way to move forward? But a lot of times, I can remember one of the most recent, instead of getting registered in 20 states, they got registered in four states because we're gonna actually go through and look at the makeup of your sales and apply it or look at it with the state's
[00:11:00] rules for economic nexus. And a lot of times once you look at it like that, you realize you don't have to get registered. On the flip side, sometimes you're not getting registered in enough states. Because as I mentioned earlier, you're not putting all of the data that is needed to be reviewed in one place to make a complete recommendation 'cause states don't make anything easy. Each state has different ideas as to what should be included in these thresholds. Some states count marketplace sales, which are your Amazon and eBay, and sales like that. Some states exclude 'em. Some states say that sales for resale are excluded. Some states say include them.
Some states say you can exclude your sales for resale, but all other exempt sales you have to include. Some states say only taxable sales. Some states say gross sales. It's different in every state. And that's
[00:12:00] why if you're relying just on the software from a company, you're either gonna be getting registered in too many or not enough states in most instances.
Every once in a while, even a broken clock is right twice a day. So it may be right, but more often than not, you're either not getting registered in enough states or too many states.
Ellie Moffat: Alright, Mike, last question here. What other things should be considered for someone else's 2026 tax plan? Anything else you wanna add in here?
Michael Fleming: Yeah you've gotta stay abreast of tax changes. Sometimes something that was previously not taxable is all of a sudden taxable. So no matter how you're doing your taxability, it can't be a set it and forget it.
The beginning of the year's a good time to look at what may have changed and you missed, or what's coming up that you need to be aware of. Sometimes, things become not taxable. They're now exempt and you don't have to worry about collecting tax on those items
[00:13:00] anymore. Sometimes, it's the exact opposite.
Sometimes, something that was exempt is now gonna be taxable. And more and more states tax more and more services every year. And our salespeople talk to some really smart people out there including CPAs and they take the position that, oh, our state doesn't tax any services.
Every state that has a sales tax taxes at least some services. So especially if you are doing services, that's something that you want to be looking at seeing if the state has implemented any new taxes on services. So, I wanna go back to one of the other questions too. You said how do people check on this.
So software, great red flag, but you can come to companies like us, as I mentioned, we have that service that data review. We also can do physical nexus reviews because even though economic nexus is new and bright and shiny
[00:14:00] and everyone's talking about it, you still have to worry about physical nexus.
Alright? An economic nexus doesn't protect you. If you have no economic nexus, you're not protected. It's an either or. It's just one more way for the states to get you to do what they want you to do, which is collect and pay their taxes. So you may be under all the thresholds, but if you have inventory in a warehouse, if you have a traveling salesperson, if you have an independent contractor, you have someone doing repairs or maintenance in a state.
These are all types of physical nexus that we still need to be concerned about. So this is a great time of year to review all of that information and whether you do it yourself or you have someone like us do it, it's something that should be done.
Ellie Moffat: Thank you so much, Mike. And I'll wrap it up with our little spiel here really quick.
If you have sales tax needs, as we've discussed here, we offer many solutions and services. You can reach out
[00:15:00] to me directly. My email is eMoffat, that's E-M-O-F-F-A-T @salestaxmore.com. You can also visit our website salestaxandmore.com. And addition to the services, we have a series of free webinars that offer CPE credit.
We have resources on our website, these podcast episodes, and we have paid resources as well. And that's it for me, Mike.
Michael Fleming: Alright, thank you everyone, and we hope to see you on the next installment of the Sales Tax and More Podcast. Bye-bye everyone.