"SUBJECT TO CHANGE"
Throughout my life I have learned that most things are temporary. This can be good or bad depending on the situation.
In the state tax world, things are constantly changing and can be temporary as well. Again, this can be good or bad, depending on your situation. For example:
- Missing a filing deadline - bad
- Missing an amnesty deadline - bad
- Statute of limitations expiring when you wanted to file a refund claim - bad
- Statute of limitations expiring when you owed additional tax - good
- Not filing returns in a state for several years when your company had an obligation to do so - bad
- Filing voluntary disclosure agreements to mitigate the exposure of not filing in prior years - good
- Missing out on available credits and incentives - bad
- Identifying, capturing and utilizing credits and incentives that you can actually use - good
- Paying sales tax on items that were not taxable or exemptions applied - bad
- Forgetting to self-assess use tax on taxable purchases - bad
- Filing refund claims to obtain overpayments of sales tax on items that were not taxable or exemptions applied - good
- Not following state tax legislation, cases, rulings on a regular basis - bad
- Finding a friendly, reliable and responsive state tax professional you like working with on a regular basis - good (okay, I through this one in there to see if you are paying attention)
- Finding out your company has a filing obligation in a new state - bad
- Planning to reduce your company's tax liability in the new state - good
- Selling an asset for a large gain and it is going to get taxed in a state with a higher tax rate and apportionment factor resulting in a large tax liability - bad
- Finding out you have a position to treat the gain as non-business income and allocate the gain to state with a lower tax rate - good
- Finding out you have to file a combined income tax return and include entities that don't have nexus (taxable presence) with the state - bad
- Finding out that the group of entities included in the combined return can utilize the losses against income or gains of other entities in the group - good
- Learning your company has been treating "bundled transactions" as non-taxable for sales tax purposes in states that treat the whole transaction as taxable under audit - bad
- Fighting and winning under audit or appeal that your "bundled transaction" should be respected and treated as non-taxable for sales tax purposes - good
- Learning that your company has just been selected for an income tax or sales tax audit - bad
- Performing a reverse audit and identifying refunds to offset tax liability identified in an audit - good
The list could keep going, but I think you get the picture. If something bad has happened in life, or with your company's state tax position, the good news is, it is probably temporary. There is most likely a practical and effective way to mitigate the risk, exposure or liability.
If something good in life has happened, hold onto it. Treasure it. Make it last as long as possible. (The same goes for state and local taxes, i.e., get that refund, and implement planning on a prospective basis to obtain annual tax savings).
Remember, most things in this life (and state taxes) are temporary and are - subject to change.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.