How to Add a SALT Niche to Your Practiceby
If you’re an accountant and have previously avoided even thinking about state and local tax (SALT) work, it’s time to come on board.
The growth of e-commerce and multi-state business, as well as the complexity of state and local taxation laws, continues to fuel the desire for accountants to add a SALT practice to their service delivery.
This comes as no surprise; nearly all U.S. states have state-level sales tax requirements and there are more than 7,000 tax rates on the books. Add to this the reality that back taxes, fines and penalties pose a great risk to most businesses and it’s easy to see why a SALT niche is in demand.
Determining Your Client Fit
Understanding the type of client that will benefit from your SALT niche is crucial to the successful expansion of your services. Determining that there is sufficient demand of SALT niche services will ensure return-on-investment for your training or hiring to provide this niche.
Which of your current clients could benefit from SALT services? While local businesses may have questions about their home state’s tax laws, it is unlikely they will have much demand for assistance.
The better prospect is the business that has multiple state locations, sells to other states via e-commerce, or deals frequently cross state lines with vendors and a supply chain. If you do not have many clients who fall into these categories, consider developing an approach to capturing more businesses with SALT needs, including online sellers, marketplace sellers or businesses with dealings in multiple states.
Online selling is experiencing dramatic increases, so there are ample prospects out there for your firm.
Compliance or Consulting Services?
Another key consideration for providing SALT services is determining which type of services to specialize in. There are two main categories of SALT services: compliance and consulting. These categories differ in the type of work required and in revenue generation.
Compliance relates to adhering to tax laws, and since most sales tax returns must be prepared on a monthly or quarterly basis, revenue from these services will be fairly steady and predictable. Most compliance services are billed on a “per-return” basis and not rate-per-hour. Compliance information will often come in all at once, ahead of the state’s monthly filing deadline – likely the 20th of the month.
Processing a high volume in short period could be challenging for a small team. Common compliance services include tax registrations, calculating/collecting owed tax, return filing to remit taxes, transmitting collected tax, addressing notices from state governments and remaining up to date on SALT legislation changes or court interpretations to ensure compliance.
Consulting services can fluctuate in price and need, and are rarely repeated, thereby creating non-recurring revenue for your firm. However, this does not necessarily mean your overall revenue will decrease; consulting fees are typically higher than compliance service fees.
Common consulting services include:
- nexus determination
- product definition and corresponding taxation
- sales tax audit defense
- financial planning
- due diligence
- tax refund or reduction
- disclosure determinations
- risk assessments
Develop an Expertise in the Necessary States
Asking questions about a client’s current compliance efforts is a great way to start the discussion about SALT services. Prepare for this conversation by becoming well versed in the compliance demands of the states relevant to your client or clients.
Develop an understanding of how they differ and what unique challenges various laws pose, such as providing more customer data or requiring digital files. Ahead of your SALT discussion with your clients, inquire as to their growth or expansion goals so you can also comment on the SALT requirements of states they plan to expand into.
Don’t forget, some towns or counties may have their own tax requirements as well. SALT goes beyond just sales tax to also include unemployment taxes, payroll, vendor payments, properties taxes and more.
Become an Expert in SALT Licenses
A highly-beneficial SALT specialty to become well versed in is SALT license requirements. Not only will this help you determine additional clients for your niche services; it’s also one of the more in-demand SALT services for growing businesses.
Businesses need a SALT license for each state in which they have nexus. Applying for a SALT license in a given state is a delicate balance of cost vs. reward and should be done with careful consideration.
Businesses shouldn’t apply too early due to unnecessary filing fees. As soon as a business files a SALT license, it requires compliance, even if the business doesn’t actually have nexus. Accountants can guide businesses to filing once they have a “material” amount of sales tax. If the sales in the state are not substantial, you or your client may find yourselves wasting time and money filing $0 returns. Filing too late puts a business at risk of cumbersome back taxes and penalties.
Developing an expertise in the SALT license requirements of the states relevant to your clients will help you guide them through the process to incur neither unnecessary charges, or fines and penalties. You can offer to file for them or provide them with all the requirements and considerations.
Become an Expert in Resolving SALT Audits
The second SALT specialty to develop an expertise in immediately is a SALT audit. States are developing increasingly sophisticated methods to identify businesses with nexus in their state and to chase those owed taxes.
As a result, SALT audits are on the rise and businesses need help. Expertise in SALT audits can not only help your clients successfully resolve issues, but also help eliminate potential triggers for sales tax audits in the future.
Notice of an audit can be subtle at first, such as a simple letter in the mail. This means many businesses are unaware that they are being audited in another state, and even fewer know how to handle such audits.
An ill-managed audit can be incredibly costly for a business, especially if a little research and investigation can help reduce the end bill. Interest and penalties are often 50 percent of the amount owed, a significant financial strain for most small- to medium-size businesses.
If a business does owe substantial amounts of back taxes, you can often negotiate the total amount or payment terms for your client via a Voluntary Disclosure Agreement to reduce the financial strain.
Consider Your Options
As you can tell, there are some intricacies to a SALT practice compared to having a niche in a certain industry or many other accounting and tax services. However, the rewards are rich – and if you are your clients’ trusted advisor, you can often cross sell services to them without too many obstacles. Good luck!