I Think I May Have Tax Liability in Multiple States, What Are the First Things I Should Do?

So the first thing that you should do is not contact the states. I can't tell you how many prospective clients that I talk to where somebody has reached out to a state Collections officer or somebody in the out of state compliance unit and inadvertently stuck their foot in their mouth by something that they said, which the state may or may not have known ahead of time. So it's not a good idea to call them and volunteer information to the states. Rather the first thing that you really need to do is assess what your risk is. So you want to look at your level of contacts and your sales volume in the states that you think you have liability in. You want to kind of gather that information together so that you can better assess what your risk is and then even after you assess what your risk is, you really want to speak to a multi-state taxation expert. Speak with an attorney and have them go through and outline what your options are. A lot of people are too quick to say, "well we have Nexus in a particular state, we owe money in a particular state so let's just go ahead and give this state all this past tax liability." What they do by doing that is they inadvertently subject themselves to more liability and more risk than what they would have owed if we had created a measured multi-state tax strategy and executed that ahead of time. So a lot of people are very quick to jump into action and what I would encourage you to do is measure twice and cut once. Really solidify what your risk is, solidify what your options are and then pick the best option for your organization in order to minimize your liability and create a compliance path so that you have a platform to operate off of in the future. It's not just the past tax liability you have to worry about, it's about creating stability for your organization in the future so that they can continue to make sales and not have to worry whether they're going to get into trouble or not. So number one it's about mitigating liability and number two it's about creating a compliance plan going forward.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law