Throughout the life of a company, business transactions, expansions, contracts and other actions often have hidden or ignored State Tax impacts and opportunities. These are almost always best handled up front at the time that the transaction, expansion, contract or other matter is being designed, drafted and implemented.
Below is a selection of the State Tax impacts and opportunities available which need to be addressed in common business situations during the life of a company.
1. Designing Your Business
Have you selected and designed the proper entity (e.g. corporation, LLC) to optimize sales and income tax results?
Did you consider state tax impacts when designing the nine components of your business model?
Have you ensured that you are withholding taxes for the correct jurisdiction?
Are your personnel properly classified as employees or contractors?
E-Verify for Incentives:
Have you E-verified the status of your new employees to meet state tax and incentive requirements?
3. Buying and Leasing Assets
Asset Classification For Property Taxes:
Have you properly classified your assets as real or personal property for property tax purposes to avoid double tax?
Purchase design for Sales Taxes:
Have you overpaid or underpaid sales taxes on your purchases by not properly designing the purchase?
Have you designed your service purchases to avoid "bundled transaction" rules, which can cause nontaxable services to be taxable?
Where both property and services are provided, are your contracts designed to position your purchases as nontaxable services rather than taxable property?
Are you collecting the required taxes for each proper jurisdiction?
For each product or service, have you made a determination whether you have a tax collection obligation based on the nature of that product or service?
Have your marketing/selling activities inadvertently exposed you to sales and income taxation in other states?
6. Additional Capital/Partners
Tax Benefits For Investment:
Have you determined whether tax credits or benefits may be available to the investor based on the investment?
Have you ensured that your company's new ownership won't jeopardize state tax incentives or other tax benefits after the transaction?
Have you chosen the best tax location for our expansion?
Have you explored tax increment or other tax preferred financing opportunities?
Physical / Economic Nexus:
Have you designed your expansion to avoid unexpected sales and income taxation in other states?
Have you designed your expansion to allow you the most favorable income tax apportionment?
Tax on Purchases Assets::
Have you determined whether sales tax is due on the purchase of the business or whether you can design the transaction to be exempt?
Exposure for Tax Liabilities:
Have you designed your transaction to minimize the risk that you will be liable for unpaid tax liabilities of a prior owner?
10. Technology & E-Commerce
Have you designed this to be a nontaxable service purchase?
Affiliate / Economic Nexus:
Have your activities subjected you to tax in other states?
Will your cloud computing usage subject you to tax?
11. Resolving Tax Disputes
Have you taken the required steps to avoid incorrect positions during the audit, to protest a tax assessment, to timely express and preserve all potential legal defenses and to build the necessary factual record?
Have you inadvertently waived your right for a full administrative hearing?
CPA / Tax Attorney:
Do you know when to engage a CPA and/or state tax legal counsel to challenge, defend, or resolve an audit, claim or assessment?
Capital Gains Exclusion:
Have you designed your corporation and sale to qualify for applicable special capital gains exclusions or properly changed your residency to minimize state tax obligations??
Tax Exposure Relief::
Have you designed the sale to address if the buyer assumes pre-sale tax exposures?