2010: The End of the "Wait and See Game"????
At a high level, all of the potential state tax law changes that may occur in 2010 will impact taxpayers by making state tax compliance easier, decrease audit activity, and result in less tax being paid by all. Okay, I am only kidding. Actually, as you might expect, the exact opposite should be expected. Meaning, state tax compliance will continue to become more complicated, audit activity will rise, and more tax will probably be paid.
I would say that most if not all state tax law changes appear to be motivated by the states' desire to increase revenue in a time when states are facing large budget deficits. Due to budget problems, states will look to obtain more tax dollars from taxpayers by enforcing the laws already on the books through increased audit efforts, nexus questionnaires, etc. States will also continue to work to close what they perceive to be loopholes through the use of combined reporting, etc. States will also seek to obtain more tax dollars from out-of-state taxpayers by implementing or enforcing economic nexus type rules, agency nexus, market based sourcing on sales of services, "Amazon" nexus, etc. More states may also enact amnesty programs that appear to have been very successful in bringing in significant amounts of revenue. In addition, more states may consider changing from an income tax to a "receipts based tax" that is not dependent on taxpayers actually having net income (similar to Michigan's Business Tax and Texas's Margin Tax (Franchise Tax)).
The goal of each state appears to be to increase revenue without hurting the state's economy or raising tax rates. This can be done by either widening the tax base, taxing more out-of-state companies, decoupling from federal tax stimulus law changes, and changing intricate state tax rules like apportionment, transfer-pricing, combined reporting, etc.
As a result, Taxpayers who have played the "wait and see game" in regards to their state tax obligations or exposure, are beginning to see the cost/benefit analysis swing in favor of being proactive rather than reactive. Similar to our health, preventative measures can be implemented now that are less costly than required emergency procedures down the road.What do you think? Will you be proactive or reactive?
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.