I just returned from an amazing vacation – a cruise of the Mediterranean. We started in Athens, Greece; spent just a couple days there enjoying the history, and then boarded our ship. The cruise took us to the Greek isles of Santorini and Crete, and then we sailed to Italy, the beautiful St. Tropez, France, and finally Barcelona, Spain. We finished our vacation by sampling many, many tapas and wines in Barcelona. About midway through our vacation, I found myself wondering – how could I do US multistate tax consulting somewhere in Europe? I’m still working on that angle, and will certainly keep you posted.
But meanwhile, on the flip side of that equation, we’ve been engaging with several foreign companies who have US operations and find our state tax laws to be, well, challenging! As I tell all my foreign clients – trust me, they are challenging for US companies too! Here are some of the main things for foreign companies to think about as they begin doing business in the US.
White Sands National Monument full of white sand dunes and gypsum crystals.
Welcome to the Land of Enchantment! This month we travel to the southwestern state of New Mexico. The states of New Mexico, Colorado, Arizona and Utah come together at the Four Corners in the northwestern corner of the state, the only such occurrence in the U.S. Although a large state, New Mexico has very little water, with a surface area of only about 250 square miles.
Inhabited by Native Americans for thousands of years before European Exploration, New Mexico was colonized in 1598 by the Imperial Spanish viceroyalty of New Spain. Later, it was part of independent Mexico before becoming a U.S. territory and eventually a U.S. state, as a result of the Mexican-American War. Among the U.S. states, New Mexico has the highest percentage of Hispanics, including descendants of the original Spanish colonists who have lived in the area for more than 400 years beginning in 1598. The demography and culture are shaped by these strong Hispanic and Native American Influences and is also expressed in the state flag. Its scarlet and gold colors are taken from the royal standards of Spain, along with the ancient symbol of the Zia, a Pueblo-related tribe.
Annapolis, Maryland: Naval Academy Chapel Dome and Harbor Queen tour vessel at City Dock.
This month we travel to the birthplace of religious freedom in America, the state of Maryland. Formed by George Calvert in the early 17th Century, the state was intended as a refuge for persecuted Catholics from England. George Calvert was the first Lord of Baltimore and the first English proprietor of the then-Maryland colonial grant. Maryland was the seventh state to ratify the U.S. Constitution, and played a pivotal role in the founding of Washington D.C., which was established on land donated by the state.
Mid-Atlantic Maryland is defined by its abundant waterways and coastlines on the Chesapeake Bay and Atlantic Ocean. Its largest city, Baltimore, has a history as a major seaport, and is also home to such tourist attractions as the National Aquarium and the Maryland Science Center.
The St. Louis, Missouri Gateway Arch and skyline
This month we travel to the “Show Me” state of Missouri. The people of Missouri have earned their motto as the “Show Me” state for their very practical skepticism of the fads that sweep other parts of the country. This attitude manifests itself in the state government’s approach to business encouragement and regulation. So, let’s look at the state and see how their approach could help your business.
The state is the 21st most extensive by area and is geographically diverse. North of the Missouri River, the state is primarily composed of rolling hills of the Great Plains and south of the Missouri River, the state is dominated by forests. The Mississippi River forms the Eastern Border of the State, eventually flowing into the swampy Missouri Bootheel.
A colonial house set amongst vibrant trees.
This month we travel across the country to Virginia. One of the original 13 colonies, Virginia possesses a lot of living history with the Jamestown Settlement and Colonial Williamsburg being notable historic landmarks.
The Shenandoah National Park lies in the eastern part of the state deep in the Blue Ridge Mountains. Mostly forested, the park features wetlands, waterfalls and rocky peaks, like Hawksbill, and Old Rag mountains. It is also home to many bird species, deer, squirrels and the elusive black bear.
Golden Gate Bridge in San Francisco, California
This month, we travel back to the mainland (and the home state of Miles Consulting Group) to the 3rd largest state in the country and the 6th largest economy in the world- the Golden State of California! With its sunny and dry coastal climate year round (except for January 2017!) and easy access to the ocean and mountains, California has always been seen as an ideal resort destination. In the 1960s, popular music groups such as The Beach Boys promoted the image of Californians as laid-back, tanned beach-goers – which, of course we all are!
California is home to the second most populous city in the United States- Los Angeles, which is home to the Hollywood entertainment industry. San Francisco, 400 miles to the north, is where you will find the Golden Gate Bridge, Alcatraz Island and cable cars.
Harpers Ferry National Historical Park
Known for its mountainous landscape and rolling hills, this month we travel east to West Virginia. The state has a rich history and is embedded in the Appalachian Mountains.
West Virginia is known for a wide range of outdoor recreational activities, such as skiing, whitewater rafting, fishing, hiking, backpacking, mountain biking and hunting. For something on the calmer side, the state offers many golf courses.
It is also one of the most densely Karstic areas in the world, making it a choice area for recreational caving and scientific research. Karstic topography is a landscape formed from the dissolution of soluble rocks such as limestone, dolomite, and gypsum. It is characterized by underground drainage systems with sinkholes and caves. These underground hydrology systems contribute to much of the state’s cool trout waters.
Old maple sugar house in Warren, Vermont.
The gold standard for fall foliage takes us to Vermont. With 75% of the state covered in forest and having the most land coverage of maple trees per capita, Vermont’s foliage season is the most vibrant. With its thousands of acres of alpine terrain, it is a popular destination for snowboarders and skiers. Trout fishing, lake fishing, ice fishing and hunting are also popular pastimes for residents and tourists alike. In the fall, hikers can catch some unforgettable views.
Vermont is attractive for more than just its environment. Vermont is also known for the manufacture and sale of artisan foods, fancy foods and novelty items such as Cabot Cheese, the Vermont Teddy Bear Company (where visitors can build their own Teddy Bear), Burton Snowboards and Ben and Jerry’s Ice Cream (where tours end by tasting your favorite flavor). Continue reading
What if you could walk into a store, buy something and not have to pay sales tax because the whole state does not impose a sales tax? Believe it or not, in some states that does happen. Several states, mainly in the South and East, have these so-called “tax holidays.” These holidays are targeted at specific goods. As we discuss below, during tax holidays specific items are exempted from the tax, only in certain states, and these holidays occur only on limited days. Very little is uniform in the multistate tax world.
This is a hotly contested topic; the question up for debate is whether sales actually increase enough to offset the lost sales tax revenue. Researchers found that on sales tax holidays, households increase the quantities of clothing and shoes bought by over 49% and 45%, respectively to what they buy on average. However, evidence shows that these holidays simply shift the timing of these purchases and some retailers will actually raise prices during the holiday, reducing consumer savings.
How did Sales Tax Holidays begin?
Ohio and Michigan enacted the first state tax holidays in 1980, offering a tax holiday on automobile purchases. However, it was New York that, with the first tax holiday on clothing, sparked the interest in other states wanting to have state tax holidays. New York sought to combat ‘border shopping’ by administering tax holidays because New Jersey does not charge tax on clothing during the ‘back to school’ shopping season in late August. Border shopping is the concept of traveling to nearby states to take advantage of lower tax rates. Another example of multistate ‘border shopping’ is that Manhattan drivers cross the George Washington Bridge into New Jersey to buy gas at the small gas station at the end of the bridge because gas is dramatically cheaper in New Jersey.
I was speaking with a marketing consulting colleague of mine not long ago and in trying to help me hone my approach for continually connecting better with my target audience, he asked me the seemingly simple question “How does someone know when they need your services?” Of course, that should be simple! I’ve been consulting for clients in this market space for many years. And yet, the circumstances when someone may need our services can vary. So, I thought I’d dedicate some time here to give examples of when CFOs, controllers or other accounting professionals might need my multistate tax consulting services.
Your Company is Expanding
Once your company begins doing business across state lines – whether that means setting up additional offices, hiring employees in other states or even just sending a salesforce out to call on clients in other states, or utilizing the services of independent contractors to perform installation, repairs or maintenance services – you are going to begin to trip into tax situations in other states. Continue reading