I was speaking with a marketing consulting colleague of mine not long ago and in trying to help me hone my approach for continually connecting better with my target audience, he asked me the seemingly simple question “How does someone know when they need your services?” Of course, that should be simple! I’ve been consulting for clients in this market space for many years. And yet, the circumstances when someone may need our services can vary. So, I thought I’d dedicate some time here to give examples of when CFOs, controllers or other accounting professionals might need my multistate tax consulting services.
Your Company is Expanding
Once your company begins doing business across state lines – whether that means setting up additional offices, hiring employees in other states or even just sending a salesforce out to call on clients in other states, or utilizing the services of independent contractors to perform installation, repairs or maintenance services – you are going to begin to trip into tax situations in other states. We refer to establishing that taxable presence in a state as “creating nexus”, and as states are becoming more aggressive, it’s getting easier to trip into filing responsibilities. We often work with clients who have already established nexus and are now just coming to the realization that perhaps they should have been filing there for several years. And sometimes we work with companies that are trying to get in front of the issue and plan ahead. Often it’s a combination of both. How can we help? We can assist in determining where the company has nexus, whether its product or service is taxable in the various states, and if so, how to get your company filing where you need to be. We can assist both on the income tax and sales tax side. In fact, we are often contacted initially on the sales tax front because many CPA firms don’t have that specialty in house, and we can nicely complement the team.
A “Money Event” Occurs
As companies expand, they often look outside for funding – either in the form of a bank loan or a cash investment by an investment fund or other private investor. In most of those cases, the lender or investor will want a financial statement audit of the company by a CPA firm. It is often during this audit that the following questions arise, “Have you considered the sales tax ramifications of your transactions?” or “Where do you have nexus?” This is particularly true for companies that may be selling services (consider Software-as-a-Service, or SaaS) or a blend of tangible products and services (maintenance agreements, consulting services, data processing services). So, why get another professional involved? We are independent of your auditor and can take a more in-depth review of your state tax situation, and also determine remedies or potential state tax planning opportunities. Our report can stand independently of the auditors’ financial report.
Mergers & Acquisitions
Often the people who truly “get” what we do are those who have been controllers or CFOs at companies that have been acquired and who have seen first-hand how messy the process can be if the target company has not addressed their multistate tax issues – particularly sales tax. Why? Because sales tax is a gross tax. It can’t be offset by net operating losses like income tax can. When a larger acquirer comes calling, the due diligence process always includes an analysis of potentially outstanding tax liabilities. Sometimes this is the first time the target company has thought through the ramifications of state tax issues. And it can often either derail a deal entirely, or make it less lucrative for the seller. The good news is that with some advance knowledge and homework with a firm who specializes in these areas, some of those problems can be identified and mitigated before the deal closes. So, if you are thinking about an acquisition in the upcoming year or two, we recommend a review of nexus, taxability and potential exposure BEFORE your suitor comes calling and performs their own due diligence. Knowledge is power.
You are a CPA and Your Client has the Above Issues
If any of the aforementioned issues apply to any of your clients, you should be asking more questions. We often partner with CPAs to help them bring a full-service solution to their clients, including multi-state income and sales tax consulting. We can help you ask the right questions and steer the conversation to one that is more proactive for your client, rather than reactive. While most of our clients are ultimately the CFO, controller or other accounting professional at companies, many of our referrals come from CPA firms or bookkeepers.
Other Resources
The linked video shares some additional background about when you might consider using a multistate tax specialist to review both your state income tax and sales tax situation. If you’d like more information, please sign up for our newsletter as well, give us a call, or drop us an email at info@milesconsultinggroup.com
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including Voluntary Disclosure Agreements. To learn more, contact us today at www.MilesConsultingGroup.com.
