State and Local Tax Issues Businesses Should Consider

State and local tax issues are a big part of a company’s tax liability. In fact, they are so impactful that a lot of companies actively decide to relocate to states that are regarded as low-tax states by the Tax Foundation, such as Florida, Nevada and North Carolina.

That said, businesses that choose to operate in more than one state must consider the tax-related issues that each state poses for them. As a business, here are three factors you should definitely consider:

Learning about nexus

Businesses must file state taxes for each state in which they do business. However, there are state-mandated rules for what exactly constitutes “nexus,” which is a term for doing business in a state. These rules vary from one state to the next, and the locality of matters will influence the outcome of the rules. As an example, factors such as where the business stores inventory and where remote workers or commuting employees live are two main considerations that impact how nexus is determined.

Federal laws are another contributing factor. More specifically, a law known as P.L. 86-272 makes it impossible for businesses to be subjected to a net income tax, no matter what state they operate in, as long as the net income tax pertains to income that stems from interstate commerce. One other caveat of this is whether the only business activity within the state in question involves the solicitation of tangible personal property orders.

In that situation, the fulfillment of the orders has to take place outside of the state’s borders in order for protections like this to apply. Now, the increased popularity of remote work — in addition to the significant pivot from shopping in person at brick-and-mortar stores to making purchases online — has altered the economy in numerous ways. Furthermore, the U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., has also impacted the timeline of nexus and when specifically it will be triggered.

Taking Wayfair as a prime example, the company gave the state of South Dakota permission to impose statewide sales taxes on remote sellers despite their physical presence, or lack thereof, in the state. The main stipulation was that the remote sellers’ sales had to exceed a certain transaction threshold, but as a result of the company’s decision, the far-reaching consequences of Wayfair are still playing out to this day.

For example, since the ruling, many other states have passed what are called marketplace provider laws and marketplace facilitator legislation to either categorize sellers in the same marketplace or combine all marketplace sales with the sales of companies within the marketplace so that the threshold of the state’s nexus is reached if not surpassed.

A lot more guidance is required in terms of mandating and monitoring nexus. However, businesses must make sure they consider all the factors that contribute to the determination of nexus.

The taxing authority response to digital businesses

As mentioned earlier, the amount of online sales being made skyrocketed in the midst of the pandemic. In fact, according to the 2020 Annual Retail Trade Survey, sales relating to e-commerce transactions increased from $571.2 billion in 2019 to $815.4 billion in 2020.

Within no more than two years, e-commerce sales experienced a whopping 43% increase, and taxing authorities were amazed. Back in 2021, the Multistate Tax Commission revised how P.L. 86-272 is interpreted, with the new understanding being that, if states followed the law, then they would be able to eliminate the federal law’s protections for most multistate sellers.

For instance, nexus could be triggered if post-sale assistance to in-state customers was provided via either chat or email. California is one example of a state that has officially adopted the new and improved MTC interpretation of nexus, while a number of other states are thinking about following suit.

Rules pertaining to apportionment 

There are different rules for each state when it comes to allocating and apportioning multistate income. If companies are operating via a uniform method when determining multistate income, it is in their best interest to reconsider how they perform their calculations so that they are paying the proper amount of money per state as opposed to overpaying or underpaying.

Together, the three factors we have spoken about today are only the beginning when it comes to taxes that businesses operating in more than one state should consider. Don’t forget that there are other considerations that must be addressed as well, including passive income and how it is handled.

Tax credits on the state and local levels are important to address too, as are any applicable incentives. Ultimately, the best advice for any business that is in the process of determining tax liabilities is to consult a tax law expert who is local to the business’ state.

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Emily Gooding

Payroll Specialist

Emily is graduating in May with a BA in Business Administration from Lander University. She has gained valuable experience as a payroll intern for BMW. We are so excited to have her on the team and  to see her excel in her role as a Payroll Specialist.

Madison Capps​

Payroll Specialist

Madison received a BS in Psychology from Southern Illinois University in 2019. Since then, she has been working as a supervisor at Starbucks and earning her second degree, a BA in Administration and Accounting, from USC Aiken in the fall. She will be joining us as a Payroll Specialist and a valuable addition to our Paysmart team.

Kristen Wilby

Payroll Specialist

Before moving to South Carolina with her husband, Kristen worked as a Sales & Marketing Specialist for Premium King in Feasterville, PA, where she gained valuable experience in strengthening the brand and generating new business. Kristen also brings to our team several years of professional experience as an Executive Assistant and as an Office Manager, where she was first introduced to payroll. Kristen’s knowledge and her innate ability to establish genuine relationships contribute greatly to the team as we continue to grow and serve our clients.

Meg Whitaker

Payroll Specialist

Meg brings nearly twenty years of professional experience to the team. Most recently, she worked as a Payroll & Benefits Specialist in Centennial, Colorado. She and her husband recently moved back to the Carolinas for his job, and we were fortunate to find her! Before Colorado, Meg worked at CPI Security Systems in Charlotte, NC, for twelve years as a Billing Coordinator and Senior Administrative Assistant. She also gained three years of experience as an HR Assistant for a law firm in Fayetteville, NC. Her expertise significantly adds to our team and benefits our clients as we continue to grow!

Rachel McClaran, EA

Advisor

As an Enrolled Agent with more than 15 years of experience, Rachel works closely with her business and individual clients to give them the tax and accounting support they need. Outside of the office, she enjoys traveling and spending time on the water with her husband and their two children. Rachel is an active member of the Junior League of Greenville, Inc.

Hina Rogers

Payroll Specialist

Hina joined the Paysmart team in August 2022. She grew up in Portland, Oregon, before moving to Greenville, SC. She earned both a bachelor’s and a master’s degree in education. After college, she represented her alma mater as an enrollment counselor in the Southeast and Western states. She enjoys traveling, road trips, cooking, and quality time with her family. Hina looks forward to serving your company’s needs! 

Sharon Quantrille

Payroll Specialist

Sharon has spent several years in the accounting industry and has completed courses to hone her skills as a Payroll Specialist. Her background as an educator, professional musician, and Human Resources Generalist has contributed to her communication skills, commitment to professionalism, and organizational skills that make her a tremendous benefit to her Paysmart clients and colleagues. A graduate of Bob Jones University with a B.S. degree in Music Education, a Master of Music degree in Piano Performance and a Human Resources Generalist Certificate, Sharon spends her free time gardening, hiking, playing the piano, and spending time with her four adult children.

Haleigh Bates

Payroll Specialist

Haleigh joined our team in May of 2022 as a payroll specialist. Haleigh has over eight years of experience helping personal and small business clients with their financial needs. She received her Bachelor’s Degree from Georgia Southern University. She enjoys spending time with her husband and their three children, Caden, Addie, and Mason.  She likes to go hiking, spend time at the beach, and volunteer at her church in the children’s ministry. 

Courtney Rossello

Payroll Tax Manager

Courtney joined the team at Paysmart Payroll Services in September 2020.  She was raised in Simpsonville, SC, and graduated from Clemson University in 2009 with a bachelor’s degree in political science and a concentration in public administration.  Courtney began her payroll career in 2011 and currently works in the payroll tax department at Paysmart.  She strives to make every client feel comfortable knowing their payroll taxes and tax returns are handled accurately and efficiently.  Courtney is also a volunteer Treasurer for a local middle school in Greenville County.  In her spare time, she enjoys volunteering with special needs children, road trips, and spending time with her two daughters. 

Emily Hargrave

Senior Payroll Specialist

Emily received her bachelor’s degree in music from West Coast Baptist College. Since her college days, Emily has gained nearly 18 years of experience in office operations and project management. Emily joined Paysmart in 2017 and enjoys using her skills to support clients and the Paysmart team.

 At heart, Emily is a small-town country girl from the Midwest but is happy now to call the Upstate home, where she doesn’t have to endure harsh winters. Emily’s favorite ways to spend her free time are reading a good book, challenging herself with puzzles, and doing her best not to kill the plants in her garden.

Julie Shull

Client Success Specialist

Julie is the Client Success Specialist for Paysmart Payroll.  She joined the team as a Payroll Specialist in March of 2020. She received her Bachelor of Science degree from NC State University and earned an MBA from Gardner-Webb University while playing on the GWU women’s tennis team. After starting her career with Wilson Sporting Goods as a Financial Analyst, she took a few years off to raise twin boys until she began working for Greenville County Schools in 2014.  Julie enjoys spending time with her family and outdoor activities.

Brad Detandt

Payroll Administrator

A graduate of Northland International University with a BA in Counseling, Brad Detandt leads the day-to-day operations of the Paysmart team. He is eager to grow the firm’s client portfolio. He brings a diverse employment background in retail, manufacturing, nonprofit ministries, and business development, with
a specialized focus on team development and process improvement. Brad’s professional – and personal – mission is to “Be Great. Serve!” Brad enjoys spontaneous activities and weekend trips to state parks with his wife Miranda and his three children.

Stephen C. Stokes

CPA | President

Stephen has more than 14 years’ experience working with individuals and businesses to meet their tax, accounting, and payroll needs. He has been the managing partner of Paysmart Payroll Services since January 2009. He is a licensed certified public accountant in South Carolina and Georgia. Stephen is also a member of the South Carolina Association of CPAs, the Georgia Society of CPAs, the American Institute of CPAs, and the Professional Association of Small Business Accountants. He has a bachelor’s degree from Bob Jones University and a master’s degree from Georgia State University. Stephen was born and raised near Atlanta, Georgia and moved to Greenville, South Carolina, several years ago. He enjoys spending time with his wife, Tiffani, and daughters, Madeline and Julianna. He is actively involved in his church and enjoys reading, sports, and other outdoor activities.