This depends upon the state. Each state has a different definition of what constitutes "transacting business within the state" Some states will not regard selling products to customers physically present within the state as transacting business - it would require more of a physical presence on the part of the company (office location, warehouse location, remote employees are living and working within the state, etc). Other states, however, have very low thresholds for what constitutes engaged in business within the state. Selling products to customers within the state and collecting sales taxes would be sufficent in those cases, which is likely why you are getting annual report notifications.