Multi-State Taxation Issues for Construction Companies

When construction businesses expand beyond local markets, many contractors find themselves navigating the complex landscape of multi-state operations. This growth brings a maze of tax regulations and compliance issues that can vary significantly from one state to another. Understanding these nuances is important for contractors to manage their operations effectively and avoid costly penalties.

In our latest video, our experts dive into the intricacies of multi-state taxation. They provide invaluable insights on how contractors can adapt to diverse tax environments and safeguard their businesses against unforeseen fiscal challenges.

Multi-State Taxation: Navigating Complexities for Construction Contractors

Kristin Bailey: Hi contractors, Kristin Bailey here, CPA and certified construction industry financial professional at KatzAbosch, a CPA and consulting firm that specializes in construction contractors. Since Maryland is a geographically small state, we have a lot of contractors in this area that have multi-state operations. But sometimes this can cause unintended tax consequences and administrative burdens.

So here with us today we have Mita Sagani from our multi-state and international tax department to answer a couple of questions about contractors with multi-state operations.

Mita Sagani: Thank you so much for having me. Hi, hello everyone.

Kristin: Can you tell us… we know that every state has different laws and regulations, the different rules, but can you tell us some of the crazy things that some of the contractors might not be aware of?

Mita: Yeah, I mean, every state has their own different rules when it comes to the nexus either that is sales tax or payroll tax or income tax. So, there are several different rules like contractors need to be aware of, especially before creating a physical presence in any state.

For example, there is a withholding requirement if an employee works in Connecticut for 14 days or more, or Maine has a number of days and a dollar a month threshold of three thousand dollars.

Kristin: So before sending any employee to any state, I think the contractors may have to look at these rules and everything.

Mita: Yeah, but yeah, I definitely looked into the withholding for their employees, and any other rules like you said sales tax, as well.

Kristin: So should a contractor register to do business in every state that they perform or perform work in?

Mita: Normally, if a contractor meets the so-called definition of doing business in any state, yes, we normally recommend them to register to do business in that state. However, every state has different kinds of definitions for doing business per se.

So there are like different parameters to measure that role, like for example if they have any property in that state, if they have an office location, if they have an employee in that state, or they are deriving any source of income from that state. So these kinds of different rules are there.

Kristin: And just to confirm, registering to do business, the rules for that might be different than the rules to file an income tax return?

Mita: Yes, and once registering to do business is getting their business registered with the secretary of state, so once they register, definitely most of the time they have to file the tax returns.

KatzAbosch is Ready to Help Tackle Multi-State Tax Challenges

Handling the complexities of multi-state taxation requires a deep understanding of various state laws and regulations, which can be overwhelming for any construction contractor. With the insights from KatzAbosch’s tax experts, contractors can confidently address the intricacies associated with operating across state lines.

If you’re facing tax challenges or need strategic advice to optimize your multi-state operations, don’t hesitate to reach out. The seasoned professionals at KatzAbosch are ready to help you manage your tax obligations efficiently and ensure your business remains compliant.

Contact us today for expert guidance and support tailored to your unique needs.