In this episode of the SALTovation podcast, Stacey Roberts is joined by Tim Noonan, Tax Lawyer and Partner at Hodgson Russ in New York, to discuss state and local tax issues. They talk about tax and legal issues related to private equity firms targeting certain companies and the importance of understanding where the target companies operate to determine any filing obligations. Stacey and Timothy also discuss the 2018 Wayfair case, and why tax professionals need to be knowledgeable to help clients navigate the process within state and local jurisdictions.
Topics discussed in this episode:
- The need for expertise in transaction tax matters during big deals
- What is the 2018 Wayfair case?
- Tax implications of private equity and hedge fund transactions
What You Will Learn:
- 2:10 State and Local Tax Considerations for Private Equity Firms
- 8:07 Understanding Nexus and State Tax Implications for Business Transactions
- 11:54 Residency Rules and Tax Audits in Different States
- “State tax issues and private equity deals are an underrated issue. You and I think it's the most important issue because that's what we do every day. But we've gotten called in on both sides of these deals where someone's getting acquired and they haven't collected sales taxes in many years. We have to clean that up and figure out if your sales are taxable in this many states. We clean that up through voluntary disclosure.”- Timothy Noonan [04:22]
- “With the Wayfair case in 2018, you now have all these sellers who might not be watching what happens at the Supreme Court level and don't realize that every state has come out and said if you have a certain amount of sales in the state, which isn't very high threshold, you should be collecting sales tax in 46 different states and thousands of local taxing jurisdictions. So that can be messy.”- Timothy Noonan [07:11]
- “The rules in most states are either similar or the same. Someone leaving Colorado has the same residency test as someone leaving New York. There's a domicile test. California's rule is a little bit different, but they all sort of sound like the same concepts of this domicile test. So in that sense, the rules are the same.”- Timothy Noonan [12:02]
- “A lot of wealth creation that happens for folks in the private equity world is through pieces of their target companies they acquire and then they sell again. It is carried interest. It is the piece of these companies that are treated as capital gain. It's intangible. So in addition to that capital gain benefit of carried interest, it has an important effect on state taxes too.“- Timothy Noonan [16:34]