When it comes to the matter of multistate tax problems, there is no shortage of complications. The idea itself gives any budding accounting professional, even seasoned CPAs, a rather overt indication that things will get complicated in this arena. Whether you talk about which states exempt non-business income from apportionment factors, which states could prove too much for your business with their franchising taxes, or if your company has operations in a state that charges tax on gross receipts, the calculations involved will take quite some time before you have a final number of exactly how much tax you are paying to which state.
Due to the complex nature of the subject, getting adequate training to understand multistate tax related matters is a very smart move. If you are a taxation accountant looking for help in this regard, you will find our training programs below very gratifying.
Understanding the Need for Multistate Tax
If your employer deals with clients who have operations in multiple states of the country, you have to understand multistate tax if you are ever going to handle their account. You will need to be able to crunch the numbers, tell your client how much tax they owe to which state, and help them file their taxes accordingly. While getting ready for filing help is not much of a trouble, since you can study any state’s forms conveniently enough after your training as a CPA, the matters of determining all the taxes you need to file for your client is not so simple.
However, we get into a brief discussion about the many complexities of multistate tax, let’s first learn a bit about this difficult, but unavoidable, law structure. To be direct, and blunt, the whole matter is merely a by-product, a side effect, of our country’s state-based law structure. Since the constitution allows the united states to each have their own law based on the traditions, dispositions, and beliefs of its citizens, it becomes naturally obvious that businesses operating across the country, or even in just two states, would have to deal with as many tax portfolios as the number of states they do business in.
The benefits of our country’s ability to have diverse, different, but united populations in its many states far outweigh any tax related complications arising from the trans-state independence to write the legislation. Therefore, as CPAs, and accounting professionals, you have to endure the difficulty and take it as just another problem that defines your profession in America.
Complications in Multistate Taxation
Coming back to the complications in multistate taxation, there are endless problems that await accountants who deal with clients operating in multiple states. You have to remember these complications arise due to another factor which happens to have a similar level in impact as the independent legislature of the states: the multitudes of business types and commercial industries. If the tax law in every state were different but there was only one industry (or a handful of them) operating across America, things would not be nearly as tough in determining multistate tax as they are now.
While a complete summary of these confusing multistate laws is impossible on this page, we have listed some of the key areas where you can look into so as to build your trans-state clients a sound multistate taxation strategy and state and local tax plan.
- APPORTIONMENT: While you are filing in line with multistate tax issues, you need to apportion your client’s income under a number of tabs. Incidentally, these tabs include factors that are subjective in nature and need careful handling. These include the non-business incomes we mentioned earlier, location of the customer using your client’s services, and often done over-reporting of income not demanded by law, among others.
- PENALTIES: Some states impose heavy penalties for missing tax submission deadlines. You will need to make sure this does not happen to your clients by keeping a keen eye on paying the taxes in a timely manner. You can make this task easier by focusing on data to ensure accurate income and tax projections.
- FRANCHISING: Another very effective way of improving your multistate taxation problems is to make sure your client’s franchising or merging efforts are directed to a business in loss (if yours is booming with profits). This is because many states impose taxes on franchises as separate business entities (a new company altogether).
- NEXUS: The problem of nexus is not always valid. For example, if employees of your client are merely marketing products, this may not make the business eligible for tax in many states. As the tax advisor, you might want to give counsel to your client about moving their people to no-tax states wherever possible.
- TAX INCENTIVES:You could also advise your clients for starting programs that could result in sizeable tax exemptions or incentives in many states, including employee trainings. These incentives may come in many forms, depending on the states in question.
- COMBINED REPORTING: You can also look into the possibility of combined reporting for multiple businesses wherever possible, especially when a business in loss and, hence, eligible for little or no tax, can counter balance the taxes on higher profits of another. This practice is allowed in many states depending on the industry of your client.
Our Products for Multistate tax Compliance Education
Only with firm command on knowledge of multistate tax compliance can you find your clients the relaxations they might be eligible for, as listed above. This knowledge can only come from good education and professional training. If that is what you seek, you have come to the right place. We have a number of training programs and products to offer you that will make you master the complexities of multistate tax compliance through well-organized materials, qualified trainers, and a number of media.
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