Do You Need A State Tax "Playbook"?
I was reading the article about Plaxico Burress in the Wall Street Journal a week ago. Plaxico just recently got of prison and is wanting to play football for just about any NFL team that will give him a chance. In the article, he says, "just give me a playbook."State Tax Playbook?
Well, as a business (small, mid-sized or Fortune 500 company) operating in the United States, do you sometimes say, I wish I had a "playbook" to figure out how to get in compliance or stay in compliance with state and local tax laws? How about a playbook to prepare for audits, manage audits, and know when to appeal, etc.? How about a playbook of applicable state and local tax planning ideas or credits and incentives?
No Uniformity Among States
Unfortunately, in the state and local tax world where there isn't much uniformity, it is difficult to create such a playbook. Each state is slightly similar, yet extremely different in its taxing scheme. The truth is, the diversity of each state's economy and demographics can shape and mold a state's taxing policy, leading to the lack of uniformity among each state.
Most, if not all, states have encountered budget deficits over the past few years and have sought to plug the budget gaps in different ways, such as raising taxes, creating new credits and incentives, widening the tax base, and believe it or not, lowering taxes.
Each Business is Unique
Now, on the business side, each business is different and obviously has different interests and desires when it comes to a state's taxing scheme or policy. Hence, the desire of each business can create complexity and diversity in a state's taxing scheme.
Both Sides of "Tax Fence"
Therefore, both sides of the "tax fence" (states and taxpayers) can take the blame for the difficulty in creating a uniform "playbook." The Multistate Tax Commission and the Streamlined Sales Tax groups have tried to create uniformity. Some uniformity has been obtained, but the ultimate goal appears to be out of reach. The Federal government has also tried or atleast legislation has been proposed several times, but none of it has gained traction.
So What Can You Do?
Well, each business is different and each state is different, kind of like NFL teams. Therefore, each business should create a "custom" playbook for their business or "team." That playbook, like NFL playbooks, should contain multiple plays or strategies that can legally be used to comply and minimize state and local taxes at the same time. Also, like NFL teams, the playbook would need to be continually updated and maintained.
I am not talking about tax shelters or tax avoidance transactions. I am talking about "run of the mill" compliance and taking advantage of all applicable credits and incentives. I am also talking about taking advantage of appropriate planning ideas and positions that coincide with the company's business purpose and goals.What is your "playbook"? Do you have one?
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.