For a long time, “doing business in another state” simply meant setting up shop in a state other than your state of residency. These days, there’s a lot more to it. Do you have customers in other states? Do you sell your goods online? Do you have an employee who telecommutes from another state?

The state where your principal business activities occur is where you should register your business. If you want to operate in another state, generally you should obtain a certificate of authority to do business from that state’s Secretary of State. A certificate of authority usually costs about $150, but can vary.

How a state defines business activities and what is considered “doing business” varies state to state. For detailed information on a particular state’s requirements, contact that state’s business registration office or state Secretary of State. Examples of what constitutes doing business in a state may include:

• Establishing physical presence by opening a new business location.
• Hiring employees.
• Soliciting business, which could mean using the Internet, mail, telephone, or print or media advertisements to conduct sales.

Many states will subject your business to state and local income and sales taxes. Due to budget strains, many states are now enforcing their laws in order to raise revenue.

Some states maintain a list of safe harbor activities that don’t constitute “doing business.” A type of activity that is often included on these lists is maintaining a bank account within a state’s borders. However, many state statutes don’t specifically define what they consider to be “doing business” in their jurisdiction. It usually depends on the facts of each case. Let me know if you think you may be doing business in more than one state. I can take a look at your situation and the possible state tax implications.