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State and Local Tax
Background

Positioning for a Sale While Managing Expanding State Tax Requirements

A manufacturer and wholesaler was considering selling all or part of its business and had historically paid significant taxes in Massachusetts and Pennsylvania. 

The Challenge

Navigating Complex Nexus and Filing Obligations Across 20+ States

Historically, the company filed tax returns in Massachusetts and Pennsylvania despite making large amounts of sales into 20 or more states for the past several years. The owners were looking to sell all or part of the business in the near future and were not aware of the tax burden associated with sales made into the other states and faced several other challenges including:

  • Inconsistent and unclear state income tax filings
  • Uncertainty around nexus due to rapidly growing staff and multi-state presence
  • Ambiguity on where they had filing obligations and how to optimize their tax position
How KLR Responded

Building a Sustainable Multistate Tax Strategy

The company engaged KLR’s State and Local Tax (SALT) team to conduct a full multistate tax review. Our approach included:

  • Nexus Study: The SALT team conducted a nexus study which analyzed where the company had established nexus for income, franchise, and sales/use tax purposes based on their operations, sales, and employees. Beyond helping identify filing obligations, the nexus study also helped estimate potential taxes, penalties and interest due.
  • Tax Planning: KLR was able to develop a state and local tax strategy which allowed it to significantly reduce its Massachusetts tax burden while also becoming compliant in the other 20+ states the company had historic issues in.
  • Voluntary Disclosure Agreements: KLR was able to approach states and negotiate Voluntary Disclosure Agreements with various states. This allowed the company to limit the lookback period (to typically 3 years) and receive a waiver of penalties associated with tax due. 

""Working with KLR gave us clarity and confidence in our multistate tax obligations. Their team not only helped us reduce our Massachusetts tax liability and avoid significant penalties, but also provided a clear, sustainable strategy for ongoing compliance. Knowing our tax position is fully organized and optimized gives us peace of mind as we plan for the future of our business.""

- CFO, Manufacturer & Wholesaler

Key Outcomes

$400K in Penalties Avoided and a Clear Tax Strategy Established

Tax Savings: KLR’s tax planning strategy allowed the company to reduce its overall Massachusetts tax liability and generate significant tax savings on an annual basis. In addition; the Voluntary Disclosure Agreements allow the company to save roughly $400K in penalties which would have otherwise been due.

Compliance Confidence: Built a sustainable multistate compliance plan, ensuring the company could continue expanding without fear of unexpected tax issues.

Peace of Mind: Knowing the issue is addressed before a potential sale allows the company to have confidence in its tax process/procedure going into any due diligence. Leadership gained a clear understanding of their tax responsibilities across all states, with KLR providing ongoing consulting support.

Strategic Positioning: KLR created a long-term state footprint strategy, ensuring the company is well-positioned for future compliance and planning.

Experience Matters. Let's Connect.

Is Your Multistate Tax Strategy Costing You More Than It Should

Our SALT Team can help you minimize penalties, optimize compliance, and unlock ongoing tax savings—so you can focus on growing your business.

Adam DoVale

Adam DoVale, Director, State and Local Tax Services

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