Ohio Manufacturers Selling Out of State: What You Owe and Where

Key Takeaways

• An Ohio manufacturer shipping product to Pennsylvania, Indiana, or Michigan can have a sales tax collection obligation in those states based on sales volume alone, with no warehouse, employee, or other physical presence required.
• Many states set economic nexus at $100,000 in annual sales. A 200-transaction trigger still applies in some, including Michigan and West Virginia, but states are steadily repealing it and the direction of travel is clearly toward sales-only thresholds.
• Depending on the state’s economic nexus rules, exempt sales may still count toward the applicable sales or transaction threshold. As a result, a manufacturer selling only tax-exempt products can, in many states, establish economic nexus and incur a registration obligation even though no tax is collected on its sales.
• Unaddressed nexus exposure continues to grow over time as interest and penalties accrue, and it tends to surface at the worst possible moment; during due diligence for a sale or recapitalization, or when a state auditor makes first contact.
• Voluntary disclosure agreements can resolve past exposure with a limited lookback and penalty relief, but only before the state contacts you, and not every state offers one.

Every Ohio manufacturer with customers outside the state runs into the same question: do we owe sales tax there, and who is supposed to collect it?

The answer used to focus largely on physical presence: a warehouse in Indianapolis, a sales rep in Pittsburgh, or a service technician who crossed into Michigan often enough. . Those physical nexus standards remain in place, but the rules expanded significantly in 2018 when the U.S. Supreme Court decided South Dakota v. Wayfair.   The Court upheld states’ ability to require out-of-state sellers to collect sales tax based solely on economic activity, leading states across the country to adopt economic nexus standards that exist alongside traditional physical presence rules.

For an Ohio manufacturer selling throughout the country, nexus is often inevitable. The more important questions are where nexus exists, which thresholds have been crossed, and whether the company’s compliance procedures have kept pace with its expanding customer base. What Economic Nexus Means for an Ohio Manufacturer

Economic nexus exists when a business’s sales or other economic activity in a state exceed the state’s prescribed threshold, creating an obligation to register, collect, and remit sales tax despite having no physical presence in the state. Following the Supreme Court’s South Dakota v. Wayfair decision, states adopted economic nexus rules requiring many remote sellers to collect and remit sales tax. Most states use a threshold of $100,000 in annual sales, but some use higher thresholds (for example, California and Texas use $500,000). A number of states also use a transaction-count threshold (commonly 200 transactions) either as an alternative trigger or, in a few cases, in combination with a sales threshold.

What creates the obligation is the sale into the state, regardless of where you ship from. Whether the goods leave a dock in Ohio or a third-party warehouse in another state, the sale to the in-state customer is the event that counts.

For a manufacturer, the sales tax compliance footprint often grows with every new customer relationship. A precision machining shop in Northeast Ohio that lands a contract with an automotive supplier in Tennessee has potentially added a tax jurisdiction. A plastics manufacturer shipping to distribution partners in five states may have nexus in all five, depending on the value and/or volume of product flowing through each.

These thresholds are measured at the state level, not the customer level. A single large customer in a new state can carry you past the threshold in one order, and once you cross it the obligation to register, collect, and remit follows.

One trap catches manufacturers specifically. Most states measure the threshold on gross sales, which include exempt and resale transactions. That means a manufacturer whose sales into a state are entirely exempt, all of it going to resellers or to buyers using it in their own production, can still cross the economic nexus threshold and pick up a registration and certificate-collection obligation even though no tax is ultimately due on those sales.

The Transaction-Count Test Is Losing Ground

  Following the Supreme Court’s Wayfair decision, many states adopted economic nexus standards based on $100,000 in sales or 200 transactions.  In most states, exceeding either threshold creates nexus, meaning even a high volume of smaller sales can trigger a filing obligation.  Connecticut is the lone exception, requiring both $100,000 in sales AND 200 transactions before nexus is established.

That approach is becoming less common. As of June 2026, transaction-count thresholds remain in 15 states, the District of Columbia, and Puerto Rico. Kentucky is scheduled to eliminate its threshold on August 1, 2026. The broader trend has been toward sales-only nexus standards, with a growing number of states concluding that revenue is a more meaningful measure of economic activity than order volume.

The transaction-count test has always had its biggest impact on low-dollar, high-volume sellers. A business that ships hundreds of small orders into a state may trigger nexus even when its total sales fall well below the state’s revenue threshold. By contrast, a sales-only standard focuses on the overall economic value of a seller’s activity in the state.

For manufacturers, the practical lesson is simple: do not assume a transaction-count threshold applies, and do not assume it has disappeared. Economic nexus standards continue to vary by jurisdiction, and states periodically revise their rules. A state that imposed a transaction-count threshold a few years ago may no longer do so today. Nexus determinations still require a state-by-state review.

What the Rules Look Like Across Ohio’s Borders

The variation is not theoretical, and you do not have to look far to see it. Among the five states bordering Ohio, the rules already diverge in ways that change what a manufacturer owes.

The table illustrates why economic nexus analysis is not one-size-fits-all.  Indiana and Pennsylvania look only at the dollar figure. Michigan and West Virginia still count transactions, so a manufacturer with a high volume of smaller orders can trip nexus in those two on transaction count while staying under $100,000. Kentucky is about to repeal the transaction count threshold and focus solely on revenue. Ohio itself, for reference, still uses $100,000 or 200 transactions.

Ohio’s Manufacturing Sales Tax Exemption Does Not Travel

Ohio manufacturers are accustomed to the Ohio manufacturing sales tax exemption, which lets qualifying purchases used primarily in production be bought tax-free under conditions defined in Ohio law. The instinct is to assume similar exemptions work the same way everywhere else. In practice they do not.

Some states write manufacturing exemptions broader than Ohio’s, some narrower. Some require different documentation. Some define “manufacturing” in a way that excludes processes Ohio includes. A handful offer no meaningful manufacturing exemption at all. The exemption is a creature of each state’s own statute, and it stops at that state’s line.

This creates two separate documentation problems for a manufacturer selling across state lines. When you sell to a customer who claims an exemption in their state, you have to obtain and retain a valid exemption certificate that the destination state accepts. That may be the state’s own form, a Streamlined Sales Tax certificate, or another multistate certificate if that jurisdiction permits it.

Exemption certificates are often a key focus.  An Ohio exemption certificate generally will not support an exempt sale in another state unless that state accepts the form and the claimed exemption. A customer in Indiana may provide Form ST-105; a customer in Pennsylvania may provide Form REV-1220. Hand a state auditor an Ohio-only certificate to support an exempt sale into Indiana and it can be rejected, leaving you owing the tax you never collected.

Where the Exposure Sits

The seller carries the liability for uncollected sales tax. If an Ohio manufacturer sells taxable product into a state where it has nexus and fails to collect, the manufacturer owes the tax, plus interest, plus penalties. The buyer is not on the hook for the seller’s collection failure.

That exposure can build quietly for years before anything forces it into view. The usual triggers are a state audit prompted by data matching, often from marketplace facilitator reports or payment-processor data that flags out-of-state sellers crossing thresholds; due diligence during a sale, merger, or recapitalization, where the buyer’s advisors price unregistered nexus states as a liability to be quantified and cleared before closing; or a voluntary registration in one state that leads the manufacturer to look at the others and find a pattern of exposure that has been accumulating.

The numbers are not trivial. A manufacturer with $2 million in annual out-of-state sales spread across four states where it never registered can be looking at six figures in back tax, interest, and penalties, depending on which states and how far back each one reaches. The most reliable way to size it is a nexus study that maps sales by destination against each state’s current rules. Rea’s state and local tax team works with Ohio manufacturers to identify where nexus exists, quantify the exposure, and build a path that limits liability while bringing the business into compliance.

How Voluntary Disclosure Agreements Work

Most states run a voluntary disclosure program that lets a seller come forward, register, and resolve past-period liability on terms better than an audit would produce. The specifics vary by state, but the structure tends to be fairly consistent: a limited lookback period, often three to four years rather than the full open-ended exposure, waiver of penalties, and sometimes waiver of interest.

The tradeoff is that the manufacturer agrees to register going forward and remit the tax owed for the lookback period. The state gains a compliant taxpayer. The manufacturer gains certainty and a defined resolution in place of indefinite exposure.

Voluntary disclosure has two hard limits. It is not offered in every state, and the opportunity to pursue this path ends the moment the state initiates contact. Once an auditor reaches out, the option is gone.

Rea’s tax advisors work with manufacturers to weigh whether voluntary disclosure fits, which states to prioritize, and how to structure the approach to hold down total liability while getting the compliance infrastructure in place.

The Operational Side of Multi-State Compliance

Knowing where you owe is the first step. The ongoing work is collecting the right amount, on the right transactions, and remitting on the right schedule in every state where you are registered.

For a manufacturer that comes down to a few moving parts: configuring the ERP or accounting system to calculate tax correctly by destination, which depends on accurate rate tables down to state, county, and local jurisdictions; tracking exemption certificates by customer and by state, with expiration dates and renewal workflows; filing returns on each state’s schedule, which may be monthly, quarterly, or annual depending on volume; and monitoring the threshold, rate, and exemption-rule changes The compliance cost is real, and it is a reason to build the infrastructure correctly from the start rather than stacking manual workarounds on a system that was never designed for multi-state sales. A manufacturer crossing state lines for the first time, or one that has been doing it without a formal nexus review, is better served treating compliance infrastructure as a capital investment in the business than as an administrative afterthought.

Know Where You Stand Before Someone Asks

The worst time to learn you have multi-state sales tax exposure is when a buyer’s diligence team surfaces it, or when a state auditor opens a file. Both put you on the clock, under pressure, paying more to fix the problem than a review would have cost to prevent it.

Rea’s state and local tax team works with Ohio manufacturers to map nexus exposure, evaluate voluntary disclosure options, and build compliance processes that scale with growth. If your sales footprint has grown beyond Ohio and your tax posture has not caught up, contact the Rea team to start the conversation.

About the Author

Sharon Uecker is a Sr. Manager on Rea’s State and Local Tax (SALT) team, specializing in sales and use tax compliance, multi-state tax issues, nexus and taxability analysis, voluntary disclosures, and audit defense. She brings over 14 years of sales and use tax advisory experience serving clients across manufacturing, retail, hospitality, financial services, and healthcare. Connect with Rea’s SALT team at reaadvisory.com/contact.