State and Local Tax Obligations of Emerging Businesses

The state and local tax obligations of emerging businesses, those that have grown beyond the start-up phase and have either secured enough capital or are venture financed to expand their operations, generally are not so different than more mature businesses or even start-ups.  While they may not be subject to income taxes if they are operating at a loss, they still generally may be subject to indirect taxes (e.g., sales and use tax on their purchases of items used in their business, and/or sales and use tax collection requirements on sales of taxable goods and services), property taxes (both real and business tangible personal property also used in their business), business license taxes, and if operating outside Virginia, possibly other taxes in lieu of income taxes.

Some states impose gross receipts taxes which are based upon a business’ sales with limited deductions; other states may impose franchise taxes which typically are based upon a business’s net worth or apportioned capital. All one has to do is to have nexus (or a connection sufficient to create a tax filing requirement) in a state(s) in order to be subject to the other state(s) taxes. Considering tax obligations in one’s home state are challenging enough, however, being compliant with the requirements in other states is important as well, particularly if the company’s growth plans include adding investors, or possibly selling down the road.  Tax issues frequently are game-changers in mergers and acquisitions.  Thus, understanding and complying with the requirements now versus later on is critical.

Questions on the state and local tax obligations facing your emerging business? Please contact a member of the State and Local Tax team or your Keiter representative if you would like to learn more about how we can help. Email | Phone: 804.747.0000.

Keiter is focused on supporting and serving Virginia’s emerging businesses. Keiter’s EmergingRVA events offer our entrepreneurial managed clients the opportunity to learn about issues relevent to their business including financing, growth considerations, company infrastructure, and more. Our EmergingRVA events also offer valuable networking opportunities with other similarly situated companies, investors, and professional service firms.

We addressed the various tax requirements in recent blog postings below:

Learn more about information on top tax state exposures, including income/franchise tax, sales and use tax, property taxes, and business license taxes.

Discover the importance of sales and use tax compliance.

Find out about business license taxes (BPOL) imposed by many Virginia localities.

Get familiar with some of the tax issues that arise in mergers/acquisitions.

For information on potential income tax withholding requirements in multiple states.