As state and local governments seek more revenue, they often get creative and aggressive in trying to impose tax obligations on taxpayers and businesses across the country. Complicating matters further is that many states rely on completely different and sometimes contradictory rules for determining subjectivity to tax, the calculation of taxable income or sales, and various exemptions. Keeping track of these developments is a task in and of itself and can be a compliance nightmare.
Our State and Local Tax Practice assists clients with navigating a full-range of issues across different tax types, such as: corporate income tax, franchise tax, personal income tax, sales and use tax, gross receipts tax, local franchise/business privilege or earned income tax, realty transfer tax, real and personal property tax and unclaimed property to name a few.
Business Taxes
As the state and local tax landscape continues to change and develop to keep pace with changing times and a changing economy, business owners cannot be burdened with keeping track of the different requirements by state and sometimes even local jurisdictions. We assist businesses with determining where they have to register to do business and file for tax based on each state or locality’s nexus or tax subjectivity rules. We also advise clients on methods for determining taxable income and income subject to apportionment or allocation, as well as planning for utilizing tax credits, exemptions and net operating losses. We regularly work with clients and their accountants or tax advisors in helping to stay apprised of state or local tax changes that could affect the business, as well as the proper steps to take to mitigate exposures or develop tax return or refund claim positions based on case law, administrative guidance and state or local statutes, codes and regulations.
We also assist businesses with ensuring they are in compliance with state and local tax requirements when undertaking a host of different transactions, such as purchases, sales, reorganizations, mergers and spinoffs. These transactions can often have varying ramifications depending on structure and federal income tax treatment. In addition, the use of pass-through entities, like S corporations, partnerships and LLCs, in addition to various special purpose entities, present a range of additional complexities that we help solve and clarify so businesses can understand the resulting tax effect. We also help with the bulk sales and/or tax clearance process to handle any liabilities and make sure a subsequent purchaser is not left with the unpaid taxes of the seller.
Sales and Use Taxes
Sales and use tax compliance can be extremely complicated when taking into account different rules for how states can compel various retailers and sellers to collect tax, in addition to the rules for taxability and exemption which usually differ by state. These issues only continue to become more complex as the digital economy expands and the use of cloud computing and remote services becomes more prevalent. Because both sellers and purchases can be held liable for the tax due on a given transaction, it is important to get these correct the first time around. We provide advice on these matters, as well as documentation and exemption certificate issues.
Unclaimed Property
The state and local practice also provides compliance and planning advice pertaining to unclaimed property and the proper rules for reporting and escheating to the correct state. Unique issues arise in the financial services industry, as well as any business that provides customer gift cards or certificates, vendor discounts and those with outstanding credit balances on their accounts. Understanding the correct type of property classification and dormancy period, as well as who the holder is for reporting purposes, can change depending on the state. We can also assist with voluntary disclosures or amnesty-type agreements with states to bring a company into compliance.
Tax Controversies and Audits
In conjunction with our Tax Litigation Practice, we will get involved at any stage of a tax dispute or controversy with a state or local government. We can take the case from the moment a notice of intent to audit is received and handle the audit all the way through to completion. We regularly appeal said cases to administrative tribunals and, if necessary, to court. Our controversy practice involves all state and local tax types, with a focus in New Jersey, Pennsylvania and the Mid-Atlantic Region.
Tax Amnesty and Voluntary Disclosure Agreements
Most state and local jurisdictions offer opportunities for businesses to come into compliance where a liability is discovered under a voluntary disclosure program if certain criteria are satisfied. The benefit of undertaking the voluntary disclosure is generally limiting look-back periods for tax and reducing penalties and interest. In conjunction with our Tax Litigation Practice, we help companies determine if a voluntary disclosure is the correct path going forward, as well as actually assisting with the application and pertinent filings. We may also get involved in applications for broader tax amnesty and keep businesses apprised of which states are offering such favorable settlement terms and when those settlement terms are being offered.
Multistate Refund Review and Planning
Our practice advises businesses on ways to decrease past and future tax liabilities by reviewing income and franchise tax returns, as well as sales and use tax payments, and other documentation to proactively identify refund opportunities. After we identify the opportunity, we can also file all refund claim documentation and see the case through until the ultimate tax savings are realized by the business. Our refund review also includes planning analysis to identify ways in which tax savings can be achieved.
Multistate Credits and Incentives Review
When certain criteria are satisfied, a business may be eligible to receive a host of different benefits, such as tax credits, grants, exemptions and tax-increment financing for making investments in their business and/or employing additional personnel. Sometimes there are even benefits available for retaining jobs in a state. In conjunction with our attorneys who focus on state and local incentives, we assist companies in identifying these opportunities, as well as the actual applications and negotiations with the state. Our team also assists with realizing or monetizing the available benefit.
Legislation, Regulations and Policy
We also have extensive experience with drafting legislation and amendments, monitoring and testifying on proposed legislation, as well as offering expert guidance and analysis in the resulting effects of proposed tax and economic development policy changes. Our team has also drafted regulations and provided comments to administrative agencies when regulations are promulgated. We work with businesses, as well as various trade associations and interest groups, on a host of tax policy-related issues.
