Corporations, limited liability companies, partnerships, trusts, as well as individuals which have various levels of connections or contacts with any state could subject that taxpayer to taxation by the state.  In some instances this may be a considerable burden to the taxpayer because of the additional record keeping and filing requirements.  In other instances this can be a planning opportunity.

The three most common types of state taxes are income tax, franchise/corporate tax and sales tax.  Each type of tax requires a different level of “contact” with the state in order for the tax to be imposed.

Though record keeping and filing requirements in multiple states can be burdensome and often expensive, proper planning can reduce the taxpayer’s overall state tax expense.  The taxpayer should carefully consider all aspects of multi-state taxation when deciding to expand into a new state.  The failure to properly plan and comply with state tax requirements can subject the taxpayer to substantial tax, penalty and interest liability.

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