The solo CPA whose client just landed an online order in another state has two problems stacked on top of each other, and they are not the same problem. The first is nexus — does the client now have a filing obligation in the new state? The second is apportionment — once the obligation exists, how is in-state vs. out-of-state income sliced? Most solo practices handle federal returns well; the same confidence rarely carries across state lines. This post walks through the four nexus triggers, the three-factor apportionment formula, the per-state documentation stack, and where the four-step planning workflow on /tax-planning slots into the engagement so the same Circular 230 §10.35 owner review the federal return carries is what the state return carries too.
The four nexus triggers a solo CPA actually has to screen for
Nexus used to mean a storefront, a warehouse, or a sales rep on the ground. South Dakota v. Wayfair, 138 S. Ct. 3995 (2018) overturned the physical-presence-only rule for sales tax and opened the door to four distinct triggers every engagement has to screen for, regardless of whether the state has adopted economic-nexus thresholds by statute. The four:
1. Physical presence nexus — the classic rule. Employees, inventory, offices, or owned/leased property in the state. Still controls even after Wayfair for income-tax nexus purposes in most states.
2. Economic nexus — a sales-or-transactions threshold the state sets by statute. Most states have an economic-nexus threshold in the $100,000 / 200-transaction band for sales tax, with state-income-tax thresholds varying widely and frequently revised.
3. Click-through / affiliate nexus — the New York-style rule that an in-state affiliate referring customers via a website link can establish nexus for the remote seller. Adopted in roughly a dozen states; review the engagement for any affiliate-marketing arrangement before dismissing this trigger.
4. Marketplace facilitator nexus — the post-Wayfair rule that the marketplace (Amazon, Etsy, etc.) collects and remits sales tax on third-party sales. The marketplace handles its own obligation; the seller’s state-by-state filing stack is usually lighter than the direct-economic-nexus case, but it is not zero.
Engagement triage is “screen all four.” Most solo practices that skip this step lose one of the four.
Apportionment basics — the UDITPA three-factor formula
Once nexus exists, the next question is how much of the multi-state income is taxable in the new state. The Multistate Tax Commission’s Uniform Division of Income for Tax Purposes Act (UDITPA) supplies the default formula: an equally-weighted three-factor blend of sales, payroll, and property, applied to the unitary business income. Most states have moved toward double-weighting or single-weighting the sales factor (and a few have gone sales-factor-only). The receipt-sourcing rule for the sales factor — “market-based” sourcing under UDITPA §9 — assigns receipts to the state where the property is delivered or the service is received, not the state where the invoice is sent or the income is booked. The contrast with §861 of the Internal Revenue Code (foreign-source income sourcing) matters because §861 logic does not transfer to the state apportionment context. The payroll factor measures compensation paid in-state; the property factor measures the average value of owned/leased property in-state; both adjusted for rent-only vs. owned-and-rent-and-owned-only situations per the state statute. The trap for a solo CPA — the factor schedules each state files are not interchangeable. Many states are now adopting Joyce / Finnigan-style Finnigan-only or Joyce-only rules for combined-return factor computation, so the same apportionment math lands in different filing cells.
Reciprocity and the per-state filing stack
For individual-income-tax purposes, a handful of states have reciprocal agreements (IL–IN–WI–KY–MI–OH–WV, IA–IL, MD–PA–VA–DC, and others). A W-2 employee who lives in one reciprocal state but works in another files only in the residence state — saving both the employee and the withholding-reconciliation the practitioner time. For business-entity nexus (C-corp, S-corp, partnership, LLC), the multistate filing stack is more involved: a nexus questionnaire per state, the factor schedule (sales, payroll, property) on the state return, the applicable add-back / modification schedule, the withholding reconciliation on the entity-level return, and a separate payment voucher per state. The engagement file has to carry the nexus questionnaire, the factor schedules, the per-state return, and the contemporaneous evidence the §6001 recordkeeping rule expects — the same audit-posture discipline the federal return already carries. The per-state reciprocity map on /states and the per-state detail surfaces (one /states/<slug> per covered state) carry the same citation chain the rest of the planning workflow uses; the per-state landing pages are the canonical place to verify which reciprocity agreements + economic-nexus thresholds the state has shipped this quarter, before the engagement letter goes out.
Position the planning workflow as the natural fit
The four-step workflow on /tax-planning — income projection, state-by-state tier selection, withholding reconciliation, reviewer-covenant sign-off — absorbs both §6654 Q4 estimated and the §174 R&E capitalization layer under the same owner-reviewed workflow the already-shipped planning post describes. The upcoming reciprocity / apportionment work fits the same four steps: step 1 projects which states the engagement needs to file in (the four-trigger nexus screen), step 2 picks the per-state apportionment tier (sales-only, double-weighted sales, three-factor), step 3 reconciles the withholding and the prior-year column side-by-side, step 4 lands the PTIN on the bottom of the planning record with the audit-log entry. The plan is for the same four-step workflow to absorb reciprocity / apportionment work without a fourth planning workflow added on top — make /tax-planning the single route the practitioner walks for every multi-state engagement, not just Q4 federal.
The Circular 230 §10.35 owner-review canon
Treasury Circular 230 §10.35 — competence, diligence, and appropriate supervision — stays with the practitioner. Every nexus trigger and every apportionment surface that lands on an engagement carries the same owner-reviewed posture the federal return carries; the preparer’s signature stays on the return; the model never transmits to the IRS and never holds an EFIN. The engagement letter matters here because multi-state is the scope clause solo practices most often skip. Specify the per-state filing, the nexus-screen scope, the apportionment factor schedules, and the withholding reconciliation the engagement letter covers — clients who push back are the ones whose state-by-state posture needs the clause most. §7216 taxpayer-consent discipline is the companion canon; without §7216 consent on file for the engagement, the practitioner cannot use or disclose client return information outside the engagement scope.
Closing
Solo CPAs who keep the four-trigger nexus screen, the three-factor apportionment formula, the per-state filing stack, and the Circular 230 §10.35 owner-review canon on the same engagement file ship multi-state returns with the same audit posture they ship single-state returns. The four-step workflow on /tax-planning is the canonical reading order; the upcoming reciprocity/apportionment release extends the same four steps rather than adding a new workflow. Book a 15-minute walkthrough at /book-demo and walk us through one interstate client — we will show you the same four steps against the same engagement file.