Navigating the Maze of State Taxes: A Personal Journey

by Alysha Harvey, MAcc, EA, CTC, CTP, CTS, People Advisor

Hey there! ??

If you're anything like me, running a 7-8 figure profitable service-based company, you know that every penny counts. And when it comes to state taxes, well, let's just say it's been quite the journey for me. Today, I want to share my personal experiences, insights, and tips on navigating this often confusing terrain. So, grab your favorite beverage, and let's dive in!

Why State Taxes Matter to Big Businesses Like Ours

When I first started my business, I'll admit, I was a bit na?ve about state taxes. I thought, "How different can they really be?" Oh, was I in for a surprise!

• Variability: Every state has its own set of rules. What's acceptable in California might not fly in Texas.
• Income Source: Some states tax based on where the service is performed, while others focus on where the service is consumed.
• Rates: From 0% in states like Florida to upwards of 13% in places like California, the range is vast.

Choosing a Tax-Friendly State

When I was setting up my headquarters, I did a deep dive into which states were the most tax-friendly. Here's what I found:

• Nevada, South Dakota, and Wyoming are among the top choices. No corporate income tax? Yes, please!
• Texas and Ohio offer some great incentives for service-based businesses.
• Florida was tempting with its lack of personal income tax.

Tip: It's not just about the tax rate. Consider the overall business environment, access to talent, and infrastructure.

Dealing with Multi-State Taxation

As my business grew, so did my client base. Suddenly, I had clients in multiple states, and that meant navigating multi-state taxation.

• Nexus: This is a fancy term that basically means you have a tax presence in a state. For me, it was a mix of physical presence and economic nexus.
• Apportionment: I had to figure out how to divide my income among the states I was operating in. Trust me, it's as complex as it sounds!

Tip: Invest in good accounting software or, better yet, a savvy accountant who's well-versed in multi-state taxation.

State Estate and Inheritance Taxes

Now, I'm a forward-thinker. So, naturally, I started thinking about the future of my business and my assets. That's when I stumbled upon state estate and inheritance taxes.

• Only 12 states and D.C. have an estate tax. Phew!
• Six states have an inheritance tax. This is based on who inherits your assets.
• Maryland is the wild child here, with both an estate and inheritance tax.

Tip: If you're thinking of passing on your business or assets, start planning early. It can save your heirs a lot of headaches (and money).

Navigating state taxes has been quite the adventure. But with a bit of research, some expert advice, and a lot of patience, I've managed to make sense of it all. And if I can do it, so can you!

Remember, it's not just about saving money (though that's a big part!). It's about ensuring your business remains compliant, avoiding nasty surprises, and planning for a prosperous future.

Got any state tax stories or tips of your own? I'd love to hear them! Let's navigate this journey together. ??

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