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Tax Credits Across State Lines

Tax Credits Across State Lines

Multi-location, multi-state businesses have more opportunities to benefit from incentives!

I have yet to work with a company that has multiple locations and operates in more than one state that was already taking full advantage of all the specialty tax credits and cost savings available to them prior to engaging my firm.  An organization that operates across state lines has a team of competent professionals to guide them so it is no negative reflection on a competency of a company to say that tax credits are unknowingly being lost. It’s just that many of these incentives are not widely known.

Fishing for Credits

Depending on the location(s) of the company and its SIC code, some tax credit opportunities are admittedly larger than others.  As would be expected, every state and local municipality has its own credits based on unique sets of criteria.  To be aware of the many opportunities is a fulltime occupation and not within the focus of most CFO’s and CPAs that businesses might assume would be corralling all such opportunities.

What’s the Incentive?

Incentives will vary based on where they’re found, but many are focused on promoting growth and the hiring of targeted groups.  The broad categories have to do with hiring across certain demographics, keeping jobs in North America or in a particular state if at the state level, advancing research and development activities, taking technological risks, advancing environmental “clean-tech” solutions or otherwise enticing progress. For example, job-related incentives such as the Work Opportunity Tax Credit (WOTC) exist at the Federal level, but there are many available by state such as California’s Cal Competes with their own set of criteria.

Why Multi-Location/Multi-State Companies Benefit from Tax Credit Reviews

As your company grows in complexity the amount of money that can slip through the cracks tends to increase.  Regulations regarding state and local taxes (“SALT”) are complex enough to escape the notice of your finance team.  Often a vendor headquartered in one state, does work for a client headquartered in another state, and work is done in a third, fourth or more states. Sales tax for products and services is an area that often shows errors.  For example in some states there are abatements and elimination of sales tax for certain kinds of activities that would not apply in other states where the vendor is located.

Whose Liability Is It Anyway?

During the course of a sales tax review that exceeded $1 Million dollars in refunds for the client, a consultant to the client was notified that he was in the practice of overseeing activities where the sales tax was overcharged, with the expectation that he would try to remedy this practice on behalf of his client. “You can never go wrong charging too much sales tax,” was his reply.  Vendors and consultants know that if any mistake is to be made, it should never be one where the vendor is liable to the state for the shortfall in sales tax collected.

It’s Easy (too easy) to Miss Savings When You Don’t Know the Rules

Sometimes the subtleties in rules across states can mean significant dollars gained or missed for multi-state companies.  For example, some states exempt sales tax from the energy consumed in the manufacturing process, depending on which state the manufacturing is taking place in.  Many multi-state manufacturers know this but do not know that when the name on the utility bill changes, the sales tax exemption will disappear and must be filed for. And any sales tax overpaid during this time can only be recovered if action is taken within the allowable statute of limitation. A multi-state tax credit review routinely surfaces submerged opportunities like this.

It Takes a Team

We have put together a cross-functional team of industry experts across all states to assure that companies with multiple locations across state lines not only take advantage of all of the credits and savings they are eligible for, but do not miss any savings because of the subtle rules and requirements by state and tax or credit.  To get a no-cost assessment of how your company might benefit visit rareintro.com

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