With more than 80,000 state and local tax jurisdictions nationwide, business owners are often unaware of the significant potential tax exposure for their out-of-state activity, which is currently a target area for state tax authorities as they seek new revenue opportunities. With State and Local Tax (SALT) laws constantly changing, the complexities of these issues are often hard to navigate.

Obviously tax exposure may exist if you are receiving letters of inquiry from state taxing authorities. However, other signs of potential SALT exposure include:

  1. Your employees cross state lines to provide out-of-state services.
  2. Your business is storing inventory or maintaining property in various states, but is not registered in those jurisdictions.
  3. You sell products to different states, even without maintaining employees or inventories there. Making sales to customers who claim to be exempt, but have not provided you with the appropriate sales tax exemption certificates, could also put you at risk.
  4. Your employees travel outside your state to deliver products to customers in company-owned vehicles. For example, a transportation company delivering materials to pipeline sites throughout the United States would likely owe tax in numerous states.
  5. You collect sales tax from customers located in a different state.

Since there is no statute of limitations for failure to file, businesses can be penalized for all years not within compliance. Risks include penalties of up to 25 percent of taxes owed, legal liabilities and the risk of operations being shut down in states where your business is not registered

To learn more about SALT and evaluate your exposure, contact our dedicated Tax Group, with CPAs in Troy, Mich., and Houston, Texas.