3 Key Tax Strategies Every Growing Business Should Know

by Alex Thacher, Tax Partner, Armanino LLP

Running a rapidly expanding business is exhilarating, but it comes with its own challenges — especially when it comes to taxes. Missing out on valuable tax savings can sting even more than not scoring tickets to your favorite concert.

If you're a business owner or CFO striving for growth, proactive tax planning isn't just beneficial — it's essential. Here are three key tax strategies that can save your business significant money and help you avoid unexpected liabilities.

1. Secure Tax Incentives Before Committing to Property Deals
Imagine this: you've just signed a lease for a new warehouse in a different state, only to realize you missed out on potential tax credits that could have greatly reduced your costs. State and local governments often offer tax credits and incentives to attract businesses that promise job creation and capital investments.

By negotiating these incentives before you finalize your lease or purchase, you can layer multiple financial benefits, such as:

• Cash grants for job creation and training

• Tax credits based on eligible investments and job creation

• Property tax abatements at the city or county level

• Sales tax exemptions on eligible equipment purchases

The best time to negotiate these terms is when you're still weighing your location options. Asking about available incentives early on can lead to substantial cost savings.

Your Next Step: Before committing to a new location, consult with a state and local tax incentives expert to explore all of the potential benefits for your business.

2. Understand SALT Laws for Out-of-State Sales
Picture this scenario: Your online sales soar, but then you receive failure-to-file notices from multiple states. Since the Wayfair decision in 2018, states have enacted economic nexus provisions, allowing them to tax out-of-state sellers without a physical presence in that state. This means your booming online sales might subject you to additional state and local taxes (SALT).

But you may be able to reduce your tax bill in your home state and comply with nexus requirements in other states. That’s how a California-based eSports team saved $1.65 million. By conducting a sales sourcing study, they discovered they'd been overpaying California income tax while underpaying in other states. By being proactive, they transformed a potential financial disaster into a significant tax refund.

Your Next Step: As your online sales grow, engage a tax expert to conduct a SALT health check. This can help you stay compliant and potentially reduce your overall tax burden.

3. Assess Tax Implications for Remote Hires
Remote work has its benefits, but it also introduces new tax complexities. Hiring an employee who lives out of state can subject your business to unfamiliar sales and income tax liabilities. For instance, an employee generating significant revenue from a different state could trigger new state and local income taxes in addition to any sales tax on taxable goods or services.

The costs might seem minor compared to your overall tax bill, but it's crucial to understand the full tax impact before making remote hires.

Your Next Step: Before hiring remote employees, evaluate the total tax cost, including any new  SALT obligations. And establish a policy requiring employees to notify HR if they move to a new state within a certain timeframe.

The Value of Consulting a Tax Strategist
If unexpected tax bills have blindsided you, it’s likely due to a lack of strategic tax planning. Involving a tax strategist in your decision-making process can help you make sure that you're not missing out on potential savings. A proactive approach can reveal hidden tax opportunities and ultimately drive your business's growth.

Your Next Step: Meet with business tax experts to dive deeper into your specific tax situation and goals. They can craft a tailored tax strategy that accelerates your business forward.

Don't Miss Out on Tax Savings
By implementing these tax strategies, your growing business can save money, avoid unexpected liabilities and thrive in today’s competitive market.

Armanino's business tax experts have the industry expertise and experience to help you navigate the complexities of tax credits and incentives. Contact us today for a free assessment and start maximizing your tax savings. Contact Geoff Mesko for more information.