All businesses operating
in the United States are potentially liable for state and local taxes. This
includes businesses that do not have a “permanent establishment” in
the United States for federal income tax purposes and businesses
that are disregarded or treated as pass through entities for federal
income tax purposes (for example, limited liability companies and
partnerships). In addition, the partners, members, officers,
directors and anyone a state determines to be a “responsible
person” of a business can be held liable for the business’s
unpaid state and local taxes.
There are a variety of state and local
taxes. These include taxes on transactions (for example, sales
tax, use tax, real property transfer tax, etc.), taxes on income
and net worth, payroll taxes, and numerous taxes imposed in exchange
for allowing a business to conduct specified activities in the state. In
addition, state unclaimed property remittance requirements are a “non-tax
tax”, by which businesses are required to deliver to the states
credits, refunds, dividends, payroll checks and other amounts left
unclaimed by customers, vendors, employees and others.
state imposes several state and local taxes. In addition, taxes
are imposed by many cities, counties and other municipalities.
require satisfaction of filing requirements at least annually, sometimes
monthly, and occasionally weekly, depending on the tax type.
planning can reduce state and local tax liabilities. For example,
businesses are required to collect sales taxes in states where they
have a physical presence. Controlling physical presence is
one way of controlling sales tax liability. In addition, manufacturers
and vendors who know that the goods or services they sell qualify
for sales tax exemptions or other nontaxable treatments increase
the desirability of their goods and services. Therefore, businesses
can be significantly advantaged by obtaining rulings from selected
state tax administrators regarding the treatment of sales of the
business’s goods or services.
Alert provides an introduction to American state and local taxes. For
further information and assistance with state and local tax issues
anywhere in the United States, please contact David
A. Fruchtman at 04-629-0520 or