The 13 Vital Elements of a Quality Cost Segregation Study
Quality Cost Segregation Study
If you have discovered that your business has established Nexus with a taxing authority, outside of the current reporting period, and the applicable State & Local Tax(es) have not been collected, remitted or filed, it may be worthwhile to consider applying for a Voluntary Disclose Agreement with the relevant state(s) as it may be your business’s best option forward.
A VDA is a contractual agreement between a business and the state in which the business comes forward voluntarily to disclose and pay its tax liability.
After determining a State & Local Tax liability has been incurred and is outstanding, coming forward voluntarily to disclose this liability can provide the following benefits:
State | Anonymity | Sales Tax Lookback Period | Penalties and/or Interest Reduction |
Alabama | Yes | 3 Years | Yes |
Arizona | Yes | 4 Years | Yes |
Arkansas | No | 3 Years | Yes |
California | Yes | 3 Years | Yes |
Colorado | Yes | 3 Years | Yes |
Connecticut | Yes | 3 Years | Yes |
Florida | Yes | 3 Years | Yes |
Georgia | Yes | 3 Years | Yes |
Hawaii | No | 3 Years | Yes |
Idaho | Yes | 3 Years | Yes |
Illinois | No | 4 Years | Yes |
Indiana | Yes | 3 Years | Yes |
Iowa | Yes | 5 Years | Yes |
Kansas | Yes | 3 Years | Yes |
Kentucky | Yes | 4 Years | Yes |
Louisiana | Yes | 3 Years | Yes |
Maine | Yes | 3 Years | Yes |
Maryland | Yes | 4 Years | Yes |
Massachusetts | Yes | 3 Years | Yes |
Michigan | Yes | 4 Years | Yes |
Minnesota | Yes | 3 Years | Yes |
Mississippi | Yes | 3 Years | Yes |
Missouri | Yes | 3 Years | Yes |
Nebraska | Yes | 3 Years | Yes |
Nevada | No | 3 Years | Yes |
New Jersey | Yes | 4 Years | Yes |
New York | No | 3 Years | Yes |
North Carolina | Yes | 3 Years | Yes |
North Dakota | Yes | 3 Years | Yes |
Ohio | Yes | 3 Years | Yes |
Oklahoma | Yes | 3 Years | Yes |
Pennsylvania | Yes | 4 Years | Yes |
Rhode Island | Yes | 3 Years | Yes |
South Carolina | Yes | 3 Years | Yes |
South Dakota | Yes | 3 Years | Yes |
Tennessee | Yes | 3 Years | Yes |
Texas | Yes | 4 Years | Yes |
Utah | Yes | 3 Years | Yes |
Vermont | Yes | 3 Years | Yes |
Virginia | Yes | 3 Years | Yes |
Washington | Yes | 4 Years | Yes |
West Virginia | Yes | 3 Years | Yes |
Wisconsin | Yes | 4 Years | Yes |
Wyoming | Yes | 3 years | Yes |
While every state has its own VDA filing medium, regulations, agreement terms, and benefits (as mentioned above), there are certain commonalities between the states.
There are generally five main steps involved in the VDA application process:
The rules and regulations around when and if a State & Local Tax liability is incurred by the establishment of Nexus can vary wildly by state, and the business’s relevant activities in that state. Over the last five years, there have been several landmark court cases that have drastically impacted the Nexus landscape in the United States. To make a proper determination as to whether a business has established Nexus with a state, it is generally advisable that the business undertakes an in-depth Nexus Study.
Consult with a tax advisor that has experience handling State and Local Tax matters to make sure you and your business stays compliant.
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