Insights from the Dallas Business Symposium
The business landscape has evolved dramatically over the past few years, with remote work and e-commerce becoming the norm for companies of all sizes. While this shift has opened up new opportunities for growth, it has also introduced a complex web of state and local tax (SALT) obligations that many businesses are struggling to navigate. From payroll taxes to sales tax nexus, businesses must understand how operating across state lines creates new tax filing requirements and risks.
At the Fall 2024 Dallas Business Symposium, Brandon Newton, Senior State and Local Tax Manager from Whitley Penn, addressed these critical issues, offering business leaders practical guidance on how to manage their multi-state tax obligations effectively. In an interview for the Symposium, Brandon shed light on common misconceptions surrounding state tax nexus and shared strategies for businesses operating in today’s increasingly mobile environment.
Misconception #1: “We Don’t Have a Physical Presence, So We Don’t Need to File in Other States”
One of the most prevalent misconceptions is that businesses only need to file taxes in states where they have a physical location or permanent employees. However, Brandon clarified during his interview that this is far from the truth. “Remote employees, employees traveling for a specific job, selling via e-commerce platforms, or even hiring contractors can create a filing requirement, known as ‘nexus,’ in multiple states,” he explained.
Brandon noted that many businesses, especially in the remote work era, are unaware that having even one remote employee in another state can establish a tax obligation. “Even if you don’t have a permanent business location, you might still need to file taxes in states where you conduct business or have employees temporarily located.”
During the Dallas Business Symposium, Brandon and the panel explored this issue further, helping business leaders understand how remote work and digital commerce have changed the tax landscape and what they need to do to remain compliant.
Misconception #2: “We Can Just Pay More Taxes in Our Home State to Cover Other States”
Another common misconception, Brandon shared, is that some businesses believe they can compensate for their tax liability in other states by overpaying in their home state. This approach, while seemingly convenient, is not effective. “State tax obligations are separate, and you can’t offset liabilities in State B by overpaying in State A. Each state has its own filing requirements, and businesses need to address these on a state-by-state basis.”
The consequences of ignoring multi-state tax filing requirements can be severe, from hefty penalties to back taxes. At the Symposium, Brandon explained how businesses can quantify their risks and avoid costly mistakes when dealing with state and local taxes across multiple jurisdictions.
The New Reality: How Remote Work is Reshaping Tax Obligations
As more companies adopt hybrid and remote work models, the complexity of managing multi-state tax obligations has increased. Businesses now have to navigate payroll taxes, sales tax, and income tax nexus in states where they may not have previously operated. According to Brandon, remote workforces and employees working across state lines can create significant tax liabilities for businesses, particularly when it comes to payroll taxes.
“For middle-market firms, tracking employees across multiple jurisdictions—whether they’re working remotely or traveling for work—can become a major administrative burden,” Brandon explained. “Businesses must stay on top of where their employees are located and ensure they are compliant with tax laws in those states.”
This challenge is even greater for companies operating in industries like e-commerce, where sales are made across multiple states. States are increasingly enforcing sales tax collection from out-of-state sellers, creating new complexities for businesses that are unprepared.
What Business Leaders Can Do: Managing Multi-State Tax Complexity
Brandon’s insights at the Dallas Business Symposium provided business leaders with actionable steps to manage their state and local tax obligations more effectively in today’s remote work environment. Here are a few strategies that businesses can adopt:
- Understand Nexus Rules: Nexus is the key concept that determines whether a business has a tax obligation in a particular state. Business leaders need to familiarize themselves with nexus rules in each state where they have employees, contractors, or sales. This includes both physical presence (such as remote employees) and economic presence (such as e-commerce sales).
- Track Remote and Traveling Employees: One of the biggest challenges in the remote work era is tracking where employees are physically located and ensuring compliance with payroll and income tax obligations in those states. Businesses should invest in tools or processes that allow them to accurately track employee locations and their related tax liabilities.
- Leverage Technology and Outsourcing: Many middle-market firms lack the internal resources to manage complex multi-state tax obligations. Brandon suggested that companies can benefit from outsourcing their tax compliance to firms like Whitley Penn or using cloud-based tax solutions to streamline their processes. Managed services can help businesses navigate the complexity of multi-state operations without overwhelming their internal teams.
- Seek Tax Savings Opportunities: Brandon highlighted that multi-state taxes can be complicated, but businesses can save money through specific deductions, credits, and exemptions. He noted, “We’ve helped many small and mid-sized businesses find value here,” adding that “many lack the in-house expertise to spot these opportunities themselves.”
At the Symposium, Brandon will share more about how businesses can take advantage of these opportunities and ensure they are not leaving money on the table.
The Importance of Staying Informed
One of Brandon’s key recommendations for business leaders is to stay informed about state and local tax regulations, which can change frequently. “In my role, I keep tabs on legislative developments, state tax cases, and administrative updates,” Brandon explained. He regularly attends industry briefings and subscribes to key tax periodicals to ensure he stays up to date.
Brandon encouraged business leaders at the Dallas Business Symposium to adopt a similar approach. Whether through subscriptions to industry publications, attending webinars, or working closely with tax professionals, staying informed is essential for remaining compliant and identifying potential savings.
Preparing for the Future: Tax Reform and the Remote Workforce
As the regulatory landscape continues to evolve, Brandon anticipates that state and local tax laws will only become more complex. States are increasingly targeting remote workers and digital sales for tax revenue, and businesses must be prepared for more aggressive enforcement in the coming years.
Brandon also touched on broader tax reform trends at the Symposium, including how states may shift their tax bases from income taxes to sales taxes. This shift will have major implications for businesses, particularly those in states like Texas, where sales tax already represents a significant portion of the tax base.
Join the Conversation at the next Dallas Business Symposium
If you’re a business leader in Dallas looking to better understand the landscape we operate in, the Dallas Business Symposium is the event you can’t afford to miss. With panelists like Damian Davis and Heath Carter and many others sharing their expertise, you’ll gain practical strategies to elevate your business.
The Symposium takes place twice a year in the city of Dallas. The next event is slated for April 2025—visit Dallas Business Symposium to learn more about the event series.
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