Multistate Taxation

Multistate Taxation

Just like Virginia, states have their own laws and impose their own taxes. Unfortunately, no two states are alike.

Sales and Use Tax

One of the most common taxes among states is the sales and use tax. Forty-six states and the District of Columbia impose a sales tax. Furthermore, states can impose their sales tax on businesses that sell products online and across state lines. While there used to be a bright-line rule that states could only impose sales taxes on businesses with a physical presence in the state, this rule was abolished and was not replaced. In the wake of this abolishment, the states have enacted their own thresholds on when businesses are required to comply with their sales tax. For the business community, having no bright-line rule has created quite a bit of uncertainty.

Online sales are not the only considerations when it comes to multistate taxation. As there are forty-six sales taxes and no two taxes are identical, the sale of a product can be taxed by one state and not another. This trend is particularly prevalent for the sale of services. While some states do not seek to tax the sale of many services, other states are quite the opposite. For businesses that sell services, it can create complexity by just having a customer in a new state.

Business Expansion into New States

When a business expands into another state through natural expansion, an acquisition of a different business, or another reason, it must be cognizant of the tax laws in the new state. Something as simple as having an individual perform services in another state or even teleworking can trigger taxes that the business must comply with. Some of the considerations businesses must make are whether they want to be exposed to income taxes, what are the state’s requirements to withhold taxes, what property taxes they would be subject to, and more. In other words, expanding into a new state involves many considerations of which taxes are one.

Unique State Taxes

While everything mentioned above must considered in many states, some states have taxes that are wholly unique to that state. For example, Florida imposes a stamp tax, Texas imposes a gross margin tax, and Ohio imposes a commercial activity tax. These taxes and other taxes in states are very unique.

Whether it is how online sales or expansion will affect your business or simply how other states impose their taxes, Christian Tennant can help navigate the tax considerations that every business must contemplate. While taxes should never be the tail that wags the dog, they must always be considered.

If you need counsel regarding multistate taxation, please contact Commonwealth Tax Law.