As your company or clients discuss year-end planning, I want to remind you that this is a good time to address state and local tax issues and opportunities.
The following is a brief list of some ideas that might apply:
Nexus and FIN 48: At this time of year, it is a good time for companies to address their nexus position in advance of their FIN 48 analysis. Operations may also be able to be restructured. If your company or client utilizes telecommuting employees or independent contractors and hasn’t addressed their nexus position in a while, this may be a good time. Also, more states have adopted economic nexus standards and “bright line” nexus standards that may come into play.
Sales and Use Tax: It is also a good time to conduct a reverse sales tax audit to identify sales and use tax refund opportunities and potential exposure. If your company or client has started to sale items over the Internet, we should talk. If your client has purchased any software, SaaS or cloud computing recently, they may want to confirm there is no sales or use tax exposure.
Income Tax: For C corporations, a reverse income tax audit could identify state income/franchise and gross receipts tax refund opportunities and potential exposure. Combined reporting and apportionment issues or opportunities may exist.
Income Tax: For flow-through entities, a reverse income tax audit may be helpful on major states such as Texas, Michigan, Washington, Pennsylvania, etc.
Credits and Incentives: If your company or clients are entering into new states, hiring new employees, building new facilities, retaining employees, "going green," involved with renewable energy, etc. this is a good time to identify and capture credit and incentive opportunities.
Transaction Due Diligence: If your company or clients are entering into any acquisitions of other companies or assets, state and local tax issues should be reviewed to determine exposure, successor liability, and nexus impact.
Residency Issues: For individual tax clients that have changed their residency to another state or are considering such a change, guidance should be provided in regards to what records they need to maintain, etc.to support their residency or domicile.
Employee Misclassification: If your company or client utilizes a high volume of independent contractors, contracts should be reviewed to mitigate exposure of those independent contractors being reclassified as employees.