state

Article Dean Dorton

State tax laws continue to change rapidly throughout the country. Have you wondered about potential tax liability to other states? This survey asks just a few of the  questions states ask when determining whether a business is subject to its taxes – income, franchise, or sales and use. The weight of interpretation given to specific questions may vary from state to state.

Thinking of the states other than those in which you are already paying or collecting and remitting taxes, answer the following ten questions for each of state.

  1. Are you registered with the Secretary of State?
  2. Do you hold a business license?
  3. Do you have fixed assets or leased property?
  4. Do you have payroll in the state?
  5. Do you have independent contractors working on your behalf?
  6. Do you make sales via the internet, an app, a catalogue, or by phone?
  7. Does your total revenue from the prior year exceed $25,000?
  8. Does your total payroll exceed $25,000?
  9. Do your total sales exceed $100,000?
  10. Does your total property, total payroll, or total sales exceed 25%?

If you answered “yes” to any one of these questions, it is possible that you have a reporting or filing obligation in the state. While a lot of business owners say the prefer to “roll the dice,” that strategy can be expensive. To learn more about your potential exposure in other states, contact us or your tax advisor.

Contact your Dean Dorton advisor or other professional adivsor for more information.
If you don’t have an advisor, but would like to speak with us, send an email to:
insights@deandorton.com

Article Dean Dorton

The break allowing taxpayers to take an itemized deduction for state and local sales taxes in lieu of state and local income taxes was made “permanent” a little over a year ago. This break can be valuable to those residing in states with no or low income taxes or who purchase major items, such as a car or boat.

Your 2016 tax return

How do you determine whether you can save more by deducting sales tax on your 2016 return? Compare your potential deduction for state and local income tax to your potential deduction for state and local sales tax.

Don’t worry — you don’t have to have receipts documenting all of the sales tax you actually paid during the year to take full advantage of the deduction. Your deduction can be determined by using an IRS sales tax calculator that will base the deduction on your income and the sales tax rates in your locale plus the tax you actually paid on certain major purchases (for which you will need substantiation).

2017 and beyond

If you’re considering making a large purchase in 2017, you shouldn’t necessarily count on the sales tax deduction being available on your 2017 return. When the PATH Act made the break “permanent” in late 2015, that just meant that there’s no scheduled expiration date for it. Congress could pass legislation to eliminate the break (or reduce its benefit) at any time.

Recent Republican proposals have included elimination of many itemized deductions, and the new President has proposed putting a cap on itemized deductions. Which proposals will make it into tax legislation in 2017 and when various provisions will be signed into law and go into effect is still uncertain.

Questions about the sales tax deduction or other breaks that might help you save taxes on your 2016 tax return? Or about the impact of possible tax law changes on your 2017 tax planning? Contact us — we can help you maximize your 2016 savings and effectively plan for 2017.