State & Local Tax

Nexus is the connection between a business and a state that gives the state authority to impose tax or filing obligations. It can arise from physical presence, such as offices, employees, or inventory, or from economic activity such as sales into the state above a threshold. Nexus matters because a business can owe tax in a state it has never set foot in, so identifying where nexus exists is the first step in understanding multi-state exposure.

Each state takes the company's total income and multiplies it by a fraction meant to represent the share earned there. The older formula averaged property, payroll and sales; most states now use sales alone, and most source a service sale to the state where the customer receives the benefit rather than where the work was performed. Because the formulas and sourcing rules are not uniform, the same dollar can be claimed by two states or by none, and many states pull untaxed sales back into their own numerator under throwback rules. The work is applying each state's rule correctly to the company's actual revenue data, and documenting the sourcing method so it survives an audit.

Sales and use tax is imposed on transactions, the sale or use of goods and certain services, rather than on income. A business may be required to collect and remit sales tax in states where it has nexus, and use tax can apply to purchases on which sales tax was not collected. Because taxability varies by product, service, and jurisdiction, sales and use tax often requires its own compliance analysis separate from income and franchise tax.

Many states offer voluntary disclosure programs that allow a business to come forward, register, and resolve prior liabilities, often with a limited look-back period and reduced penalties. We evaluate exposure across jurisdictions and advise on whether voluntary disclosure or another path is appropriate, then handle the negotiation and filings so the matter is resolved on terms the business understands in advance.

Yes, from the first information request through the state tax tribunal or court. The early decisions matter most: agreeing the sampling method before the auditor extrapolates from it, scoping the period, and getting taxability and apportionment positions on the record at the exit conference. A notice of liability then starts a short clock; in Illinois the protest window is 60 days, after which the assessment is final. We take the protest to the Independent Tax Tribunal or the Department's hearings office, and to the courts where it must go, and we watch for the same issue surfacing in other states' audits.

Closely, and in both directions. The pass-through entity tax election that most states adopted after the 2017 federal cap on individual deductions is a state decision with a federal payoff, and it has to be made entity by entity and on time. Where a company places a warehouse or hires a remote employee creates income tax nexus the deal model never priced. In an acquisition, tax liability follows the assets: Illinois and other states hold a buyer liable for the seller's unpaid tax unless a bulk sale notice is filed before closing. We sit in on the entity, hiring and transaction decisions so the state consequence is known before it is incurred.