State & Local Tax
Briggs & Veselka is able to assist with your state and local tax needs, and as the largest independent CPA firm headquartered in Texas, we have the resources to meet these needs and deliver value in a manner that is consistent with your desire to maximize value for fees.
How We Can Assist with State & Local Tax Issues
Reverse Audit and State Tax Refunds
Manufacturing operations in Texas and many other states allow for significant sales and use tax exemptions. Many of these exemptions are missed by taxpayers and they are due significant refunds when these purchases are evaluated. A “reverse” audit is designed to identify and quickly recover sales and use tax overpayments resulting from the complexities of the laws and exemptions surrounding these taxes. With minimum disruption to the business, we can evaluate where these overpayments take place and utilize our experience to quickly obtain these refunds. For more information, contact John Cooney at firstname.lastname@example.org.
Tax Mitigation Strategies
While state and local taxes may not be on the forefront of our clients’ minds as they focus on growing their business, consideration of the following issues, among others, can drastically impact the state and local tax burden: company structure; locations, contract language, billing and AP systems, procurement and supply chain activity, intercompany transactions, and warehouse and fulfillment activities. Our SALT practice can assist in addressing these issues in a manner likely to reduce taxes paid and simplify tax filings. For more information, contact John Cooney at email@example.com.
State and local tax audits, especially sales and use tax, can be complex and auditors typically schedule any questioned transactions as being taxable until further information is given by the taxpayer. As a result, many preliminary and final audit results grossly overstate the actual amount owed. Our goal is to reduce the potential audit assessments before they occur and work closely with the auditor throughout the process, resulting in lower audit assessments and reduced effort and fees required to reduce erroneously overstated assessments. For more information, contact John Cooney at firstname.lastname@example.org.
States including Texas, Louisiana, and California have provisions for Managed Audits where taxes and penalties can be reduced or waived in addition to the taxpayer having more control over the timing and scope of the audit. This control allows the taxpayer to include potential tax overpayments and refunds in the sample pool allowing for sample and projection of tax overpayments that would have otherwise been ignored by state auditors. Managed Audits are an effective way to prevent grossly overstated audits and the need to fight to reduce them and result in the reduction of penalties and interest. For more information, c Save & Exit ontact John Cooney at email@example.com.
The first step to understanding state and local filing business requirements is identifying the taxing jurisdictions that have the legal right to impose taxes on the company. There must be some level of connection, or nexus, between the company and the taxing jurisdiction in order for taxes to be imposed. Once an adequate connection is made, the company then may have the obligation to file sales and use tax returns in addition to other state and local tax filings. A nexus analysis involves determining whether the activities of a company are adequate to establish a filing requirement. We will evaluate the activities of a company including where inventory is being stored through company warehouses or fulfillment centers, where sales people or sales agents are traveling, where warranty or customer service visits are taking place, where affiliates are operating potentially causing nexus, and other activities that may cause a state and local tax filing requirement. For more information, contact John Cooney at firstname.lastname@example.org.
Voluntary Disclosure Agreements
If it is determined that a company has established nexus and has not filed state and local tax returns, taxing jurisdictions may impose taxes on past activity including periods beyond the statute of limitations (since no returns were filed) and impose hefty penalties and interest. By contacting the taxing jurisdiction anonymously, in many cases, we can get the jurisdiction to agree to waive penalty and interest in addition to limiting the look-back period to the statute of limitations period. This can save a taxpayer significant money and bring them into compliance. For more information, contact John Cooney at email@example.com.
Resale/Exemption Certificate Management
Sales and use tax is due on all sales of tangible personal property unless a valid resale/exemption certificate is obtained from the customer. State and local tax auditors evaluate the validity of a certificate including the company name, taxpayer number, and whether the certificate can legitimately be received in “good faith”. We can assist in establishing procedures to collect and review these certificates in a manner that reduces the potential sales and use tax liabilities of the seller. For more information, contact John Cooney at firstname.lastname@example.org.
SALT Insight: Tax Mitigation for a Texas Manufacturing Company
If a Texas contractor builds a facility under a lump sum contract, the contractor is considered the consumer of all of the materials incorporated into the project. Therefore installed equipment, that would otherwise be exempt from sales and use tax when purchased by a manufacturer, is taxable to a contractor under a lump sum contract.
However, if the contract is a separated contract, where the agreed upon contract price for the materials incorporated into the work is separately stated from the agreed upon contract price for skill and labor, the contractor can issue a resale certificate for the materials and accept a manufacturing exemption certificate from the taxpayer for qualifying manufacturing equipment.
By utilizing this contract method in addition to other strategies, a taxpayer can significantly reduce the legal amount of sales and use taxes required. It could be advantageous to have a conversation with a Briggs & Veselka SALT professional when entering into contract conversations, because the contract structure could have an unexpected negative impact on your tax liabilities.