SALTovation: Navigating the Complexities of State and Local Tax by Aprio

In this special 75th episode of the SALTovation Show, we are excited to bring you a rerelease of our very first episode! Join us as we take a trip down memory lane and get to know some of the SALTovation members who have been instrumental in our growth and success over the years.

In this premiere episode, we will share our extensive years of experience in the field, as well as our personal journeys of when and how we joined TaxOps. Discover what drives these passionate professionals and hear their valuable insights and answers to questions from both business and non-business owners about tax.

Topics discussed in this episode:

• Tram Le is a member of SALTovation and has over 10 years of working in the state and local tax. She shares her journey in the tax sector, and why she enjoys working at SALT. 
• Judy Vorndran is the head of the state and local tax practice and has been practicing for 25 years. She shares her journey in the tax sector and the transition she has seen in her 25 years of practice.
• Alexander Korzhen’s 15-year journey in state and local tax
• Stacey Roberts shares her journey from federal tax to SALT
• Understanding the layers of the state and local tax blueprint whether as a small or large business. 
• The assumption that all CPAs know about local and state taxes. Look where you can add value to your client as a CPA.
• How to understand Nexus when traveling for business from state to state.

Quotables:

• “SALT is navigating the gray area that exists when laws are not written specifically to business and are not keeping track with business.” -Alexander Korzhen

• “There are layers upon layers of taxes across our nation that apply to each and every business.” -Judy Vorndran

• “A nexus questionnaire is really a fishing expedition from a state.” -Stacey Roberts

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Introductory Call

This week on the SALTovation podcast we continue our discussion on the ever-changing landscape of state and local tax. Jordan Goodman, Attorney at HMB Law, discusses the changing landscape of state and local tax, focusing on the investee allocation cases and the shift from considering the location of the business to the location of the asset being sold. He highlights the confusion and lack of clarity in state tax laws, emphasizing the need for uniformity and clear guidelines. Jordan also touches on the challenges of remote work and the impact of automation on tax audits.

Topics discussed in this episode:

• The investee allocation cases have changed the game in state and local tax, shifting the focus from the location of the business to the location of the asset being sold.
• The distinction between intangible and tangible assets is fading in the courts' minds, leading to the treatment of the sale of an asset as the same as the sale of the thing that owns the asset.
• State tax laws lack uniformity and clarity, causing confusion and challenges for businesses and tax professionals.
• The rise of remote work and automation has made tax audits more efficient and increased the likelihood of audits for businesses of all sizes.

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Introductory Call

This week on the SALTovation podcast we discuss the ever-changing landscape of state and local tax with guest Jordan Goodman, Attorney at HMB Law. Jordan highlights the rapid pace of developments in SALT and the challenges faced by businesses and taxpayers. Jordan talks about the need to understand the impact of changing policies and regulations on businesses and individuals. He also discusses recent court cases and their implications for taxpayers. Jordan raises concerns about retroactivity in tax laws and the need for fair and transparent processes in tax administration. Listen as Jordan shares his thoughts on the taxation of digital advertising and the evolving nature of nexus rules. 

Topics discussed in this episode:

• States' competition and the need to expand tax bases
• How retroactivity in tax laws creates challenges for taxpayers and may violate due process
• Challenges faced by smaller retailers in dealing with compliance burdens
• Alternative apportionment and the court’s role in determining its applicability
• The need for a more comprehensive approach to apportionment
• How taxpayers can engage with state and local jurisdictions to address tax issues and work towards fair and reasonable solutions.

Quotables:

• "I think the competition among the states and the locals now are really emphasized because everybody went to a single sales factor. You have to import it. But now they're realizing there's limitations to that and they've got to look at things differently. ” -Jordan Goodman [04:30]

• “The government is looking for the ability to raise revenue without offending the electorate by putting it on people. Whether it's corporations, which always was the tag, but now it's wealthy individuals. They don't pay their fair share, so you're kind of pushing the burden out to other people. And the wealthy people only get one vote. So it's a very good common man type argument.” -Jordan Goodman [08:06]

• “If you're going to pass a regulation it has to go through a certain process and you have to have open comments and time for it and meetings and it's got to go for a first reading and a second reading and all the states are different. It's a unique way to challenge things but it can be very effective.” -Jordan Goodman [16:04]

• “I was raised with this principle that as an advocate, I can argue both sides of any issue and I actually think I'm obligated to do it. The state should pick a side, right? They have to decide what side they're on and go with it. Now, you may make half the people angry and half the people sad, but that's the choice they have to make for advocates. We can argue both sides and in fact makes my wife very angry when I just play devil's advocate because that's.” -Jordan Goodman [24:15]

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Introductory Call

This week on the SALTovation podcast, we continue our conversation with Katherine Loughead, Senior Policy Analyst at the Tax Foundation, on various state and local tax issues. Katherine discusses the impact of the Tax Cuts and Jobs Act (TCJA), the trend of state tax reform and relief, and the challenges of tax policy in a complex political landscape. Katherine also touches on the importance of broadening tax bases and lowering rates, as well as the need for simplicity and transparency in tax laws.

Topics discussed in this episode:

• The TCJA eliminated the deduction for entertainment expenses and imposed limitations on state tax deductions, which has had a significant impact on high-tax states.
• Many states have been implementing income tax rate reductions in recent years to promote tax competitiveness and economic growth.
• New Mexico and South Dakota have broad sales tax bases, which has motivated them to reduce sales tax rates.
• The complexity and lack of transparency in tax laws can create challenges for businesses and taxpayers.
• There is a growing trend of states exploring new revenue sources, such as digital advertising taxes and wealth taxes, but it is important to consider the impact on economic growth and avoid picking winners and losers.

Quotables:

• "In an ideal world, if you want to really have an ideal tax system where you can create a lot of economic growth and have simplicity, you should do things this way. But it gets messy because politics is politics and so you have to work within that system and do the best you can. But we like to talk to lawmakers about how ideally tax codes should look like they were designed on purpose. But a lot of times people are coming in and out of the legislature and new governors have vastly different agendas.” -Katherine Loughead [01:37]

• "This has definitely been the biggest wave of state income tax reform and relief the U.S has ever seen. With so many states reducing their rates, and many times, not just once, but several states have come in and reduced their rates twice over the last three years, several times. A lot of them are prescribing future rate reductions and then when revenue continues to come in stronger than they expected, they're able to then adjust those and bring rates down a little bit lower.” -Katherine Loughead [07:29]

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Introductory Call

This week on the SALTovation podcast, Katherine Loughead, Senior Policy Analyst at the Tax Foundation, discusses the importance of sound tax policy and how the Tax Foundation is conducting tax policy research to inform policy deliberations at the state, federal, and international levels. She talks about the impact of the Tax Cuts and Jobs Act (TCJA) and the Wayfair decision on state tax policy. Katherine also emphasizes the need for states to adjust to the new normal, including the rise of remote work and the need to attract businesses and taxpayers. 

Topics discussed in this episode:

• The role of the Tax Foundation
• Trends in tax policy over the past five years
• States' unexpected revenue surplus post-pandemic
• How income tax complexity makes it hard to predict liabilities
• Challenges of property assessments and the public perception of taxes
• Helping the public understand tax systems 

Quotables:

• "The Tax Foundation is a nonprofit, nonpartisan 501 tax policy research organization and we've actually been around for over 85 years now and we work to advance sound tax policy at the state, federal, and international levels.” -Katherine Loughead [00:50]

• "Switching from federal to state has been interesting because so much happens every single year at the state level. So there are many ways you can help move the needle in the right direction. Instead of being a very small part of a big wheel, you're able to be one of a few players that are really having an impact, and that's been highly rewarding.” -Katherine Loughead [05:35]

• "We've had, of course, the pandemic and all of the state responses to that, everything that's happened at the federal level since then with federal aid and then now coming out of the pandemic, we've seen states have a lot more revenue on hand than they initially expected.” -Katherine Loughead [12:13]

• “People remember exactly what they paid in property taxes in a certain year, but don't add up all their receipts or have a strong sense of how much they're paying in sales taxes. It's a little bit here and a little bit there, but over time that adds up quite a bit. With income taxes, there's so much complexity to the income tax system where you get exemptions here and deductions there and then clawbacks here.” -Katherine Loughead [16:01]

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Introductory Call

In this episode of SALTovation, we continue our conversation with Olga Goldberg, SALT Partner at Pierce Atwood LLP. They discuss the importance of taxpayer advocacy and the surprising stance taken by the New Hampshire Department of Revenue Administration in a recent tax case and delve into the topic of taxpayers litigating against tax assessments, even when the amount at issue may not be significant. They highlight the importance of pushing the issue to get answers and establish precedents for future cases. They also touch on the uptick in battles over disclosing information in recent years and emphasize the need for clients to be prepared for the additional costs and challenges that may arise in tax litigation.

Topics discussed in this episode:

• Potential risks associated with disclosing confidential taxpayer information
• Additional costs and risks associated with public disclosure
• How states like Massachusetts and Connecticut handle residency and income tax
• Maine’s recent confidential taxpayer decision
• Challenges businesses face in protected information during legal proceedings

Quotables:

• "To establish a true answer, like Wayfair, it's probably not a big deal. Just go ahead and collect. You can agree on something, but at least you have that public answer that in theory, you know, people are going to be held to or states or businesses or whatnot.” -Olga Goldberg [02:51]

• "One of the recent battles that we've had which is not even a tax issue is confidential. The attorney general or the assistant AGs have been really pushing for the disclosure of confidential taxpayer information, like tax returns, and then just confidential information of the taxpayer, like details, of contracts and other information.” -Olga Goldberg [04:40]

• "Luckily, at least so far, trial courts seem pretty skeptical of the AG's arguments, they've been ruling in our favor, and they've been protecting this information. So, that's the good news, that it's not getting out there, but the bad news is that it's adding to the costs of a case that might not have a ton of evidence.”  -Olga Goldberg [08:07]

• “Maine has a court-created second avenue to an exemption, which is that you can just file a declaratory judgment requesting an exemption, whether or not you have filed an application or whether or not you have requested abatement. So, you have two options, you can go the abatement route or you can go this declaratory judgment route.” -Olga Goldberg [20:22]

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In this episode of SALTovation, Meredith Smith and Alexander Korzhen speak with Olga Goldberg, SALT Partner at Pierce Atwood LLP. Olga shares her journey into the field of law and specialization in state and local tax. Olga delves into the challenges and concerns surrounding remote employees, particularly concerning nexus and withholding. She discusses the current legal issues she consistently argues in state and local tax and the challenges and concerns associated with remote employees, particularly regarding nexus and withholding. Tune in to hear more about Olga’s unique journey and insights into state tax.

Topics discussed in this episode:

• Law is problem-solving in the real world
• Navigating remote employee tax issues
• Compliance with remote work taxes
• Residency audit complexities
• Maine Safe Harbor 
• New Hampshire residency requirements explained

Quotables:

• "One of the reasons I like to work with our employment lawyers is because we talk a lot about, how we are going to document this information, and what kind of policies the company should have in place.” -Olga Goldberg [16:13]

• "There are two paths to being treated as a resident. One is common law domicile and two is statutory residency. So New Hampshire does not have a statutory residency. It's common law principles and they have a statute that defines what a residence is.” -Olga Goldberg [25:25]

• "If you're in a situation where you have this super low bar to clear to be treated as a New Hampshire resident under this department position, and you don't have a resident tax credit, which, to me, does not seem entirely constitutional, it's going to result in a lot of double taxation.” -Olga Goldberg [29:33]

• “The pandemic opened the playing field, but then you have these established larger employers who maybe they did and maybe they didn't shift their policies during the pandemic, but then they contracted again. So they're kind of shifting back because of these tax policies, tax rules, and the difficulty of compliance.” -Olga Goldberg [18:01]

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Introductory Call

In this episode of SALTovation, Meredith Smith and Judy Vorndran continue their conversation with Masha Yevzelman, Litigator at Fredrikson & Byron, P.A. They discuss the challenges of litigating tax cases and the lack of consistency in state tax laws. They highlight the need for factor presence thresholds and small business exemptions. Masha shares examples of significant cases, including a property tax exemption dispute between government entities and a residency case involving conflicting state interpretations. Masha, Judy, and Meredith emphasize the importance of understanding the impact of tax decisions on individuals and businesses.

Topics discussed in this episode:

• Factor presence threshold standards for income tax
• Challenges faced by large businesses in tax litigation
• Impact of state tax rates on controversy
• Tax consequences of residency decisions
• Shift in remote work and its impact on tax considerations

Quotables:

• "When you look at a visual of which states have factor presence for income tax purposes, it's pretty clear that it's a very small number of states. But what's interesting about the MTC position is the MTC said if you're going to adopt this website position state, you should have factor presence.” -Masha Yevzelman [01:27]

• "That's why the litigation is a challenge. You've got to have the big taxpayers doing it, not the little guys unless there's a giant class action that takes time, effort and bandwidth to support. So you just don't see the advocacy unless you're a large multinational business.” -Judy Vorndran [03:01]

• “Some cases really aren't suitable for settlement. Like I said, it's kind of an all or nothing proposition. It's an ongoing issue. Clients need certainty, too. And so even like settling a few years in an unprincipled way doesn't fix it because then what about all the later years where the facts are the same and the law is the same and what are we going to do then?” -Masha Yevzelman [04:50]

• "We're seeing more aggressive state positions. If you know that that's the position of the Department of Revenue and the auditor is applying it and the appeals officer is going to apply it, then really the only way to challenge it is through litigation.” -Masha Yevzelman [06:01]

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Introductory Call

In this episode of SALTovation, Meredith Smith and Judy Vorndran speak with Masha Yevzelman, Litigator at Fredrikson & Byron, P.A. She shares her journey into the field of law and discusses the various areas of law she practices, including tax disputes and litigation, and the increasing trend of audits and enforcement in state and local tax. Masha talks about her experiences with audits and trends in the field, including the increase in Nexus audits and residency audits. She also provides insights on remote employee compliance and the impact of marketplace laws.

Topics discussed in this episode:

• The increasing trend of audits and enforcement in state and local tax
• Licensure issues when practicing in multiple states
• The potential impact of new legislation in Minnesota
• The challenges and compliance issues related to remote employees
• The Wayfair decision and marketplace laws

Quotables:

• “I'm seeing marketplace audits, because of the proliferation of the marketplace laws across the country, faster than anything has ever happened in the history of state and local tax, in two years.” -Masha Yevzelman [06:14]

• "I think in terms of audit trends, I think they're going to be going after 86 to 72 really hard, and that is getting litigated, and it's going to be litigated more and more.” -Masha Yevzelman [08:33]

• "I tell some of my clients it's three thousand a year in compliance costs to hire a remote employee. I'm sorry that you didn't realize your agnostic hiring policy was going to create all this compliance. You're there and you may not make any money, but you still have all these compliance duties.” -Masha Yevzelman [19:40]

• “I think remote work is a really big space right now in the advice side because I think the taxpayers and clients are kind of trying to figure out what do we do with all these remote workers. I think that will transition to the states doing something about it, too.” -Masha Yevzelman [20:34]

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Production Support

This episode was produced with support from Truth Work Media. www.truthworkmedia.com

Tax and Legal Challenges in the Cannabis Industry with Nick Richards: Part 2

In this episode, Meredith and Judy continue their conversation with Nick Richards, partner and co-chair of the cannabis law group at Greenspoon Marder LLP. They explore the differences between the psilocybin and cannabis industries, specifically focusing on the challenges they face with federal regulations, taxes, and audits. Nick talks about the implications of the federal tax code 280E. He also discusses the economic benefits of marijuana businesses to their local communities, the stigma and education that still need to be overcome for progress to be made, and the potentially life-changing palliative effects of psilocybin for those suffering from terminal illnesses.

Topics discussed in this episode:

• Tax implications for the psilocybin industry 
• Cannabis industry challenges and opportunities
• The battle against stigma in the psilocybin and cannabis sectors

What You Will Learn:

01:00 The 280E “add-back”

08:37 Stigma and challenges surrounding the use of psilocybin for terminal illness

18:27 How tax professionals can help in the cannabis and psilocybin industries 

Quotables:

• “The psilocybin industry doesn't want to be compared to the marijuana industry. The problem is that the federal government is going to see them the same and the roadmap that we have, the experience that we have, is from the cannabis industry.” -Nick Richards [00:25]

• “When the cannabis industry got started, people didn't understand 280E. When 280E showed up, they sort of said that can't be right. Here is the reality of 280E in a very simple example. 280E applies to deductions but not to the cost of goods sold. If I buy a mushroom to sell and I pay $2 for that mushroom and then I pay my salesperson a $2 salary and they sell it for $5, I just made a dollar. But because of 280E, I am not going to be able to deduct the $2 I paid on my salesperson.”  -Nick Richards [02:37]

• “Because of the way our system works, state tax returns start at line 35 of the federal tax return. So if you're in a company that is subject to 280E, you're going to pay that tax again at the state level because it takes off from line whatever of the local level.” -Judy Vorndran [04:45]

• “I don't think it is fair to treat a legitimate business like it's not a legitimate business. It's kind of what you're saying Indirectly by disallowing expenses and otherwise, and then regulating and retransferring things that are muddled.” -Nick Richards [10:20]

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Production Support

This episode was produced with support from Truth Work Media. www.truthworkmedia.com

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Introductory Call