There are over 80,000 state and local tax jurisdictions nationwide, each with its own set of evolving rules and regulations. At WilkinGuttenplan, we understand the multi-jurisdictional complexities and offer compliance and advisory services for companies operating in a single state as well as those operating nationwide.
Income, Franchise, and Gross Receipts Tax
All but six states impose a corporate income tax. Even if you find yourself doing business in one of those six states, your company may still be subject to that state’s franchise or gross receipts taxes. With so many taxes that a business could potentially be subject to, it is essential to understand your company’s exposure and to stay abreast of the ever-changing state tax landscape in order to be in compliance with all the state’s unique regulations.
WG’s SALT team can review your business operations in order to determine the states where your company has nexus, or a connection, and therefore where you are required to file income, franchise, or gross receipts tax returns. Although there are a few broad concepts to investigate when reviewing nexus, the ultimate deciding factor that will trigger a sufficient connection varies considerably from state to state, with factors ranging from objective bright line thresholds to those that are quite subjective and require an experienced interpretation.
Apportionment and Allocation of Income
In order to shift the state income tax burden away from in-state to out-of-state businesses, many states are doing away with the three-factor apportionment formula that weights a company’s property, payroll, and sales, in favor of a streamlined single-sales factor apportionment formula. WG’s SALT advisors can help you stay in compliance with the applicable methodologies that have been adopted by the states where your company is doing business in order for your business income to be accurately reported.
Sourcing of Service Income
Ever since market-based sourcing was first introduced, more and more states have been following suit by adopting the new sourcing rule over the previous cost of performance standard as a way of shifting the state income tax burden to out-of-state businesses. WG’s SALT advisors can provide you with the proper tools to determine where your customers are receiving the benefit of your services in order to ensure that your business income is being correctly stated.
If the need for audit representation ever arises, WG’s SALT professionals will work directly with state tax auditors on your behalf in order to minimize potential assessments and negotiate the abatement of any assessed penalties.
Sales and Use Tax
With sales and use tax imposed by 45 states and thousands of local jurisdictions, this particular area of state and local tax has historically been complicated. The challenges of sales and use tax are further exacerbated by the new economic nexus rules resulting from the U.S. Supreme Court case South Dakota v. Wayfair, particularly for e-commerce and digital services companies. In the aftermath of Wayfair, it is critical for businesses to understand their sales tax exposure, mitigate risk and past exposure, and establish processes and systems to ensure ongoing compliance.
Ever since the Wayfair decision was handed down by the Supreme Court in June 2018, states have reacted by enacting economic nexus standards. With sales thresholds and effective dates varying considerably from state to state, it is often difficult to stay current with the relevant standards. WG’s SALT team can evaluate your company’s tax reach and provide you with the necessary information to accurately and timely comply with the state’s filing requirements.
Now that economic nexus standards have been enacted by the majority of states, the administrative costs of sales and use tax compliance can be significant. WG’s SALT professionals can help your company streamline the compliance process by working as an intermediary between your internal accounting team and an automated tax reporting and filing service.
Nexus Studies and Voluntary Disclosure
WilkinGuttenplan can review your business operations in order to determine where you may have nexus, or a connection, and therefore should be filing tax returns. Compared to the one-size-fits-all heuristic approaches deployed by other firms in determining when to enter into voluntary disclosure agreements, WG’s SALT professionals provide a more optimized analysis of potential tax exposure based on you company’s unique fact pattern. We offer comprehensive assistance with voluntary disclosure programs in order to bring your business into compliance in states where you should have been filing tax returns, and to minimize the tax exposure and penalties for previous periods.
Tax Credits and Incentives
Relocating or expanding your business into a new state can present significant tax opportunities in minimizing your state and local tax liability. Since tax credits and incentives vary considerably from state to state, WG’s SALT professionals can inform you of the opportunities that may be available to your business based on your site location options and guide you through both the application and execution in order to maximize your potential tax credit or incentive.