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August 2014 • www.CPAPracticeAdvisor.com 19 building to create nexus. I invite you to see ou r shor t v ideo ou r f ive most common nexus-creating activities for some more information on that. It may surprise you how low the threshold for nexus truly is. Once you understand what activi- ties create nexus for sales ta x, then learn the nuances of income tax nexus. If you have nexus for sales ta x, you don't automatically also have income tax nexus in every state. Nexus for sales tax and income tax is like two circles that have large intersecting areas but also have their own independent tests as well. As such, it's possible that you might not have nexus for sales tax but you do have nexus for income tax. Sales tax nexus is usually the biggest hotspot for your clients, because it carries so much potential exposure. But you also need to be ready to answer your clients on income tax nexus and t a ke ac t ion to protec t t hem f rom potential exposure there as well. Growing Your Practice Protecting your clients from state tax liabilities will grow your practice if you know what services they need. Here are some of the solutions you can ofer or services you can perform to help pro- tect your clients from the exposures with state tax nexus. • Nexus consultation and analysis • Exposure analysis • Voluntary disclosures and amnesty • Registrations • System automation for sales tax collec- tion. Get the rates right and constantly updated. • Tax return preparation and fling Once clients realize where they have nexus, their usual reaction is to want to get registered in those states right away and start collecting/paying the taxes. But that could be the worst thing to do and you need to understand why. Tey may have past exposure that needs to be dealt with frst through voluntary disclosures and amnesty programs. Once past exposure is resolved, then they can register and begin collecting and paying the appropriate taxes. Tis can seem daunting with thousands of taxing jurisdictions with changing tax rates and diferent taxability rules. And it is daunting if you tr y to handle it manually. Most likely they will beneft from automating the process using a reputable third party service to track the ever-changing rates and taxability of items they sell. CPAs can get involved in helping their clients get the system automated and all set up. Ten on an ongoing basis, the CPA can assist w ith the return fling. Sales tax returns are due either monthly, quarterly or annually and income tax returns are due usually on an annual basis. And that's how your business grows as you protect your clients' vital inter- ests. Of course, there's more, much more, you ca n do u nder t he u mbrel la of SALT. Tere's consulting and research into ta xabilit y of items your clients purchase. Tere are so many diferent laws and cases that impact whether what they buy in a given state is even taxable. You could save your clients real money as you help them analyze their l a rger pu rc h a ses . You cou ld even identify areas where they have overpaid the taxes and secure refunds for them. Ta l k about prem iu m, va lue-added ser v ices! A s you g row you r SA LT practice you could get involved in the lucrative service of assisting your cli- ents with revenue agent reviews at the state and local tax level. You may be ver y surprised how often your own existing clients are under audit by a state. Hopefully this gives you an idea of where you can take this as you gain expertise. And we can teach you how we've been successful and you can just replicate (and improve, I'm sure) on what we've done. But that's down the road a bit. The first step, in my opinion is to learn all about nexus and how those laws apply to your clients. And fortu- nately we have lots of resources avail- able to you to become much more knowledgeable on what creates nexus. Learn what the current nexus standards are, and how they evolved to this point. What is the U.S. Supreme Court's role in determining nexus, what is Con- gress' role and what about state govern- ments, do they have a say? What about movements to pass a federal law on this issue? Has that ever been done, if so, what are the federal rules? Are there diferent standards of nexus for income tax versus sales tax? If so, why? Did you know, for example, that it's actually easier in most states to have nexus for income tax purposes that is for sales tax purposes? You will learn all that and a whole lot more. Once you learn all that then you will see how you can use it to beneft your clients. We also have training that we can ofer to you for how to actually conduct nexus reviews and consultations for your clients how we charge for it; what's the going rate; and what are the deliv- erables. All these things we can make available to help you begin now to expand your state and local tax service ofering. Which automatically leads to recurring work on the compliance. TOP INFORMATION WEBSITES FOR SALT ACCOUNTANTS • SBA: Learn about your state and local tax obligations:http://www.sba.gov/content/learn-about-your-state-and-local-tax-obligations • NOLO – 50-State Guide to State Laws: http://www.nolo.com/legal-encyclopedia/50-state-guide-internet-sales-tax-laws.html • Streamlined Sales Tax Project: http://www.streamlinedsalestax.org/ • Marketplace Fairness Act Information: http://www.marketplacefairness.org/ • State and Local Sales Tax Rates in 2014: http://taxfoundation.org/article/state-and-local-sales-tax-rates-2014 • How State Sales Taxes Work: http://money.howstuffworks.com/personal-fnance/personal-income-taxes/state-sales-taxes2.htm Andrew H. Johnson is a cofounder and principal in Peisner Johnson, one o f t h e l a r ge s t S A LT (State and Local Tax) practices in the United States. 5 HOTSPOTS CHECKLIST * Hot Spot Description Nexus ✓ Sales into which states ✓ Employees in which states ✓ Independent contractors in states ✓ Conferences in which states ✓ Common & State by State Activities Links Rates & ✓ Verify sample of rates- Product Taxability Make sure tax is collected Use Tax ✓ Do you have a process in place to track use tax? ✓ Make a purchase and don't pay sales tax? Look for use tax issues. ✓ Pulling inventory off-shelf, even gifts to charity ✓ Sample of fxed assets Exemption ✓ Do you have a process in place Certifcates ✓ collect and to validate certifcates? ✓ Review sample of certifcates (10-15) signed, not expired, correct permit number Returns ✓ Is there a process in place to fle returns? ✓ Are you taking advantage of necessary discounts for prepayment. * Provided by Peinser Johnson & Company A Year in the Life of a SALT Accountant is sponsored by Avalara 5 HOTSPOTS CHECKLIST * A Year in the Life of a SALT Accountant is sponsored by Avalara