Today's Technology for Tomorrow's Firm.
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August 2015 • www.CPAPracticeAdvisor.com 27 Gail Cole is a sales tax expert with Avalara and has a penchant for dig- ging through the depths of BOE sites and discovering and reporting rate changes across the country. A Year in the Life of a SALT Accountant is sponsored by Avalara c c o u n t a n t b y A v a l a r a 3 Ways to Win New State and Local Tax Clients By Gail Cole T h r e e a r e a s a r e r i p e f o r t h e reaping of new clients: • R&D; Tax Credit – size doesn't mater • Construction – cost segregation • Sales and use tax – automate! R&D; Tax Credit Many business owners think they're too small to claim R&D; tax credits, but when it comes to tax incentives, size shouldn't mater. O n l y a f r a c t i o n o f s m a l l a nd mid-sized companies eligible for the R e s e a rc h a nd De ve lopme nt t a x credit ta ke advantage of it; many don't even try because they errone- ously a ssu me t hey don't qua l i f y. S h o w t h e m h o w t h e y c a n t a k e advantage of it and they'll want you as part of their team. For example, do they know that the R&D; credit is open to the apparel industr y as well as aerospace? Tat both sof- ware developers and d a i r y f a r mer s cou ld qua lif y? Do they k now the following? • In June 2014, the IRS made it easier for small and midsized businesses to claim the R&D; credit. See instructions for Form 6765, Credit for Increasing Research Activities. • Lab rats don't own the R&D; tax credit. People in street clothes (like architects and engineers) are eligible, too. • Improving outdated products and processes, which small businesses do regularly, can be enough to qualify. • E l i g i b l e b u s i n e s s e s c a n c l a i m unclaimed credits for past open tax years (3 years). • Te credit carries forward up to 20 years, making it ideal for start-ups. In addition to the federal R&D; tax credit, research and development tax credits are available in approxi- mately 40 states. State codes gener- ally conform to the federal defnition of R&D; expenses that may qualif y for a tax credit, but some stray from them, and the incentives and credit ofered vary by state. California, for example, modifes the federal defni- tion of gross receipts for the R&D; ta x cred it . A nd t hat 's just a ver y small aspect of one state's policy. Clients depend on your expertise to help t hem negot iate a nd t a ke advantage of both federal and state tax credits. Cost Segregation Construction and real estate can be c ont e nt iou s , t hor ny i ndu s t r ie s . Sometimes, a high tolerance for pain a nd stress is requ ired in order to achieve what's best for the organiza- tion. Take cost segregation—a vol- untar y technique to avoid under- u t i l i z a t i o n o f d e p r e c i a t i o n advantages that can greatly beneft t a x payer s . Potent ia l c l ient s w i l l u n d o u b t e d l y u n d e r s t a n d t h e depreciation of f xed assets but the more adva ntageous depreciat ion prov ided by a Cos t Se g re gat ion S t u d y i s b e s t u n d e r t a k e n b y some one w it h e x per t i se . C l a i m deprec iat ions w it hout su f f ic ient documentation to back them up and you could easily fnd yourself paying heav y back taxes, fnes and penalties. Timing and strategy mater. Dif- ferent approaches a re needed for diferent property types (apartments ver s u s ma nu f ac t u r i ng f ac i l it ies; retail stores versus warehouses), but any leasehold improvement could qualif y for a Cost Segregation Study. Potential clients will want to work with you if you: • Can provide clients with expertise in construction and engineering as well as tax. • Have an in-depth understanding of relevant legal precedent and changing tax laws. • Know how difering circumstances afect the depreciation of the exact same type of property. Sales and Use Tax Tere are more than 12,000 sales tax jur isd ictions in t h is countr y and their rates are all subject to change. State and local jurisdictions regu- larly change rates, alter boundaries, amend regulations, and eliminate existing exemptions and create new ones. I n add it ion, state sa les ta x holidays exempt small handfuls of products during specifc periods of time; in some states local participa- t ion i s m a nd ator y, a nd i n some states it isn't. Every time there is a change, businesses are impacted. A nd as w it h a l l t h i ngs related to t a x e s , f a i lu re to c ompl y c a n b e costly. As a CPA, you know this. But do y o u k n o w a b o u t automated sales tax Sof t wa re-as-a-Ser- vice? Can you help future clients: • Fac i l i tate e x em p t i o n certifcate management? • Apply accurate sales tax rates for all transactions? • Handle mercurial product taxability rules and regulations? With automated sales ta x SaaS, you can, perhaps allow ing you to devote more time to helping clients by sec u r i ng R & D t a x c red it s or p r o d u c i n g a C o s t S e g r e g a t i o n Study. L arge corporations with armies of atorneys and accountants excel at taking advantage of tax credits and fnding cost saving elements within a s p e c i f i c i n d u st r y. Ye t smal l er companies tend to self-censor, assuming they don't qualify. Te good news is that there are millions of small and midsized businesses in the United States alone, compared with thousands of large businesses. Te people behind small and midsized busi- nesses are everywhere: they eat lunch at your favorite restaurants; they jog down your favorite trails; and they'll be at the next party you'll atend. You may even fnd yourself siting next to one during your next fight. And they are just waiting for you to tell them something they don't already know.