How do I prioritize which states to address first if I have exposure in many states?

Sort states by dollar exposure first. Address the largest, longest-exposure states before smaller ones, they represent both the greatest financial risk and the highest audit probability.

Key takeaways

• Rank by estimated dollar liability: multiply annual sales volume in each state × average tax rate × number of years non-filing; this gives a rough exposure estimate per state
• Top priority: highest sales volume + longest non-filing period + highest state tax rates; for most ecommerce sellers this is CA, TX, NY, FL, and WA
• Audit aggressiveness as a secondary factor: some states are more aggressive pursuers of remote seller compliance than others; TX and CA have active outreach programs; IL has been active post-Wayfair; this affects which states are most likely to find you first
• Economic nexus trigger date matters: if you only crossed a state’s threshold 6 months ago, the exposure is small even if sales are high, prioritize states where you’ve exceeded the threshold for years
• MTC multi-state VDA: consider using the MTC’s program to address multiple states simultaneously rather than managing separate negotiations; participating states include most of the major exposure states; reduces administrative overhead significantly
• Low-volume states are lower priority but not zero: small states with minimal sales may not warrant a formal VDA; calculate the risk of leaving small exposure unaddressed vs. the cost of the VDA process
• Clean up going forward simultaneously: as you address back periods in high-priority states, register and begin collecting going forward, don’t address just back periods without also resolving ongoing compliance