Our Blog

Multi-State and International Tax Issues

The way you can very simply think about the multi-state and international tax services our firm performs is:

  1. We help people/businesses navigate varying degrees of tax crisis/controversy through our audit, collections, and criminal tax defense practices
  2. We help people/businesses avoid these situations by bringing them into compliance.
  3. We improve our clients’ tax situations in order to save taxes, accumulate net wealth, and help their businesses grow.

However, within these service areas, perhaps our hottest practice area is in helping multi-state companies and/or those that have some international aspects comply with the laws and utilize their framework to succeed in their business. Increasingly, with the proliferation of technology and enhancement of logistics, more and more companies fall into this definition.

Here are some areas we can help with multi-state and international tax issues:

  • Multi-State Payroll Tax Issues
  • Multi-State Income Tax Issues for Businesses
  • Multi-State Residency Issues for Individuals

Navigating a Changing Landscape

A few years ago, you would not have thought of a small retailer selling books on Amazon as a multi-state business, but the reality of today’s situation is that these companies have operational impact well beyond their state’s borders. When they first come to us, our prospective clients do not really see themselves as multi-state businesses, but by the time we are finished with their matters, we have built them and effective and affordable framework for compliance.

The landscape has completely changed and will continue to change. The expansion of concepts such as economic nexus and the rapidly changing state laws and state enforcement priorities almost making writing about this subject a lost cause (the laws are changing that quickly). So, please take what you read here with a grain of salt, because as time passes this page may quickly be not entirely accurate. That is not intentional, but you should understand that no legislative process, administrative law, or judicial interpretation is going to move as fast as technology does these days.

As soon as the state issues a decision, it is almost obsolete because someone is doing things a different way. From our perspective, it is what makes this area of law so exciting, but in the same breath, it can be terrifying for our clients who are just trying to get compliant and stay out of trouble in an uncertain world. In the past, businesses did not need to factor in this kind of fluidity.

Additionally, states and in particular California, are becoming more and more aggressive in their definition of who has a filing requirement and who owes them tax. At times, it seems like more than half of our clients are out of state businesses who have somehow stepped into a California issue in some way shape or form. The majority of these businesses did so unintentionally, after all, who really thinks about the consequences of their business operations in a state that they are not in? Nevertheless, intent is not a factor in whether or not you are subject to multi-state taxation and because of a variety of factors, you may be operating and accruing liability in California and not even know it.

As mentioned, California is one of the more aggressive states in pursuing businesses that are located outside of its borders for tax revenue. California seemed to realize the fact sooner than other states that it could go after businesses and individuals that may have contact with the state of California, but who actually don’t actually reside in California and who don’t have voting power in California. Did you know that California has actually increased its base of operations and now has offices in New York, Texas and Illinois, which serve as regional jumping off points for out-of-state California tax compliance. That’s right, you can get audited in New York or Texas or any other state by a California auditor and be subject to California state tax.

Challenges for Multi-State Businesses

  • How do we manage and mitigate risk when the law is unclear or when we operate in different states with different or conflicting laws?
  • How do we stay in compliance in light of a fast moving changes in certain sectors?
  • How do we manage to avoid issues without dedicating substantial resources to our compliance? How can we make this cost effective and build an infrastructure that makes sense for the size of our company?