I learned a new acronym this week: SALT. That stands for State and Local Tax (SALT). I know that readers are groaning, but tax compliance is another form of compliance that companies do need to worry about. I am really fortunate though, because I have a guest blogger who is not only an expert in the field, she makes this subject fun and interesting.
Please welcome Mary Jo Dolson, CPA and partner at Skoda Minotti. Through a series of SALT-focused blogs she is going to educate us about this terrifying world and more importantly, share some issues/advice on the ever growing importance of state and local tax issues. Businesses and individuals can no longer put their head in the sand and think states will ignore a potential revenue stream—no matter where you are based, you may be seen as a taxpayer in any state that you do business. Bottom line is that the states need money and one way to secure these additional funds is to become more aggressive on businesses operating in the state.
I know everyone is just super excited, so let’s get started!
Mary Jo, can you tell us a bit about yourself?
Mary Jo: I am a Partner with Skoda Minotti, a regional CPA firm with offices in both Ohio and Florida. I head up the State and Local Tax practice for the firm. I have been involved with state and local taxes my entire career. I have been working in SALT for over 35 years and have experience in all aspects of state and local taxes. I have worked both in industry at a Fortune 500 company and public accounting during my career and have both Big 4 and regional accounting experience.
I like to tell clients that I like finding the strange exemption or position that can be taken to reduce their state and local tax burden. I enjoy the challenge of figuring out a way to fit a square peg into a round hole.
What does SALT encompass?
Mary Jo: Obviously that includes state income tax and a variety of sales/use taxes. But SALT includes many other taxes – personal property tax, unclaimed funds and payroll taxes (withholding and unemployment) just to name a few. I intend to focus mostly on income and sales related taxes since that’s key for business, but people should feel free to reach out to me if they have questions on the other issues. For example, if you have employees in multiple states, payroll taxes might be an issue you need to investigate.
How do we start?
Mary Jo: Before we begin down the road to understand more about SALT issues, I thought it would be good to start with a glossary of terms that will be utilized throughout the blog series. These are terms you have probably heard but might not be 100% sure of the meaning or how it might impact your business. I’ll start slow with some common terms:
- Taxpayer – This is an easy one! A taxpayer can be an entity and/or an individual. It is someone that is subject to the state tax laws of the states doing business in.
- Look Back Period – is the period of time that a state can go back for review either under an audit or a voluntary disclosure agreement. Generally under audit the look back period will be three or four years. The lock back period under a voluntary disclosure agreement can vary.
- Voluntary Disclosure – is a means to clean up past sins with a state for either state income tax and/or sales and use tax. A voluntary disclosure usually has a shorter look back period for past returns than if the state finds you. Generally the look back period is going to be three or four years. There are going to be some requirements to qualify for a state’s voluntary disclosure program. All states with either an income tax or imposing sales/use tax will offer a voluntary disclosure agreement for a taxpayer that discovers they have been operating in the state without complying with the states laws. The attractiveness of a voluntary disclosure agreement is that the state generally will not impose penalty on the amount of taxes due.
- Amnesty – is very similar to a voluntary disclosure agreement, meaning it is a mechanism to come forward and clean up past issues. The difference between the two is that states have voluntary disclosures available at all times and amnesty must be enacted by state’s legislature. Amnesty is only offered for a short period of time and all back returns must be filed. Similar to a voluntary disclosure agreement, penalty is forgiven as part of amnesty. Some states will also reduce the amount of interest due as part of amnesty.
- OK those were all really easy, although unfortunately it does seem to suggest that we get a bit more complicated next week. Thanks!
Elizabeth Baldwin is Environmental Compliance Officer for Metropolitan Hardwood Floors. In her 25 plus year career in the wood industry has visited over 70 countries and hundreds of facilities of all sizes and types. She describes herself as a “jack of all wood trades.” Familiar with jungles of all sorts–having camped out along the Amazon and walked the halls of Congress–she blogs for the NWFA on both environmental and regulatory issues for educational and informational purposes only. Her blog is not intended and should not be construed as legal advice. Persons seeking legal advice on compliance with CARB, TSCA, the U.S. Lacey Act or any other law, regulation, or compliance requirement/claim should consult with the regulatory agency directly and/or a qualified legal professional.