What Are the Opportunities That Are Available for Multi State Tax Planning?

What Are the Opportunities That Are Available for Multi State Tax Planning? Well the reality of the situation is there's tremendous opportunities and the opportunities exist because most people aren't doing this correctly what we've seen at our firm is we've seen a huge lapse in the number of CPAs that are catching these issues when they're filing companies normal federal income tax returns everybody is focused on the federal and compliance in the state that they're in and nobody is concerned about potential planning opportunities that exist outside of that states borders so we deal with this a lot in California, because here we've got a nice high over 13 percent tax rate for state income here and everybody is trying to get out of paying that level of income tax either on the corporate level or on the individual level so the reality of the situation is for companies in California they want to try and bifurcate as much of their sales outside the state of California as they can if California makes really tough for a variety of reasons but the reality of the situation is is that most entities have presence in different states in one way or the other so particularly for large organizations with either multiple offices that are spread out manufacturers with maybe a manufacturing plant people that are storing inventory in various locations or a variety of ways that people touch different states you might have an argument.

The Nexus of your company goes beyond your state's borders and there's a variety of planning opportunities just based on an arbitrage of your state tax rate instead of paying 13 percent what if we paid a blended tax rate of 7% that's a 6% savings on corporate income which who knows in the millions how much it can be so we've been doing a lot of this work with the companies and in terms of getting in the compliance but, the optimization factors that occur because of all this multi-state activity are really great and companies and owners and officers have been able to really take advantage of this situation, because it cuts both ways and cuts in favor of the state because the state is collecting more revenue for more people touching its borders but also you're touching more states borders if you have Nexus with the state of Georgia and you're earning income in the state of Georgia and you're utilizing Georgia's roads and you're utilizing Georgia's resources you should pay the state of Georgia tax and guess what the tax is a lot lower than in California also it's a really good opportunity to try and plan things out from a long term perspective so that you can scale this business operations grow has more contacts come into play as the laws get stricter and as the states get more capable of tracking this stuff very easily it's best to have a plan in place to deal with this because not only are you optimizing the business from a saving tax perspective but you're optimizing. The business from a reducing risk perspective which is equally as valuable so there's a lot of opportunities involved in multi-state planning if you or your company has a presence in multiple states I would highly encourage an investigation of the issue talk to a tax attorney talk to a multi-state tax expert we really dive into the situation to see if there's things you can take advantage.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law