https://evergreensmallbusiness.com/file-out-of-state-tax-returns/ Actionable Insights from Small Business CPAs Thu, 07 Sep 2017 16:10:13 +0000 hourly 1 https://wordpress.org/?v=6.9.4 https://evergreensmallbusiness.com/file-out-of-state-tax-returns/#comment-4390 Thu, 07 Sep 2017 16:10:13 +0000 http://evergreensmallbusiness.com/?p=5068#comment-4390 Your argument #1 is a really good one. Any buyer worth his/her salt will check for this out-of-state tax liability during due diligence. If this tax liability is discovered during due diligence, it can only send up a red flag that maybe there are other aspects of your business operation that aren’t up to snuff. So how do the taxing authorities in other states find out? First, they share information across states to an extent you’d never imagine. Second, if you have any employees living in another state, that sets off a trigger that you have “business interests” in their state, and increases their efforts to examine any business revenue that you might have.
And I know firsthand that Steve’s argument #2 is true. For at least five years after I sold my small software company, certain states that focus on retrieving tax revenue from out-of-state businesses (Arizona is one that’s particularly ferocious) continued to send delinquent tax filing statements for at least six years after I sold my business. Worse, the buyer of my company reported my contact information to any inquiring state tax authorities for potenetial tax liabilities in years before they bought my company.
Lastly, by the time you pay any out-of-state tax liabilities that are in arrears, you’ve most likely paid the taxes in your own home state – and now you face the prospect of having paid double taxes, with a real headache on your hands about getting a tax refund from your home state.

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