No matter the state or jurisdiction that your business resides, state and local taxes always seem to be in transition. Porte Brown’s tax experts can help your business remain compliant with state tax laws and regulations, develop innovative tax planning strategies regardless of where your company conducts business or the number of states your company may reside, perform nexus reviews, and highlight potential areas of sales and use tax exposure. Our state and local tax (SALT) specialists are not only knowledgeable about state tax and local tax planning and strategies, they are also highly experienced with a wide range of industries and business types, so you can rest assured that you are receiving the highest level of service and support.
To ensure that clients conducting business in multiple states report their income correctly, Porte Brown created its State and Local Tax (SALT) Practice Group. A company does not want to find out after the fact that their recently completed business deal has an accompanying tax exposure that they were unaware of. Our specialized expertise can help you identify these issues before they occur.
When goods and services cross state lines, nexus* comes into play and your company potentially becomes responsible for income taxes and other taxes in those states. Depending on your company’s presence in another state (via inventory, sales representatives, etc.), your company may be responsible for applicable taxes in those states. Driving your truck across a state line could cause you to have nexus, depending on which state you are traveling into. We help clients anticipate their potential exposure.
Our proactive team asks the right questions up front so that we can anticipate potential issues. We work with clients throughout the year to minimize or eliminate tax exposure at a later date. Porte Brown is dedicated to learning about your business and protecting it from unnecessary tax liabilities.
Is your company registered in all of the states in which it operates?
Porte Brown’s State and Local Tax Practice Group has experience and expertise in three primary areas:
*Nexus defined: a nexus in general means a connection. The term nexus is used in tax law to describe a situation in which a business has a "nexus" or presence in a state and is thus subject to state income taxes and to sales taxes for sales within that state.
On August 27th, Governor Pritzker signed into law the pass-through entity tax (S.B. 2531), which is effective for tax years ending on or after December 31, 2021, and beginning prior to January 1, 2026.
So what does this mean? It means that for a few years instead of no one getting the benefit of the Illinois tax paid at the partner/shareholder level the entity will now get the benefit! That’s great news!!!! Under the old rules, the shareholder/partner would pay the Illinois tax at the individual level for their share of the K-1 income allocated to Illinois. In the year paid, the individual would be able to claim a deduction for any Illinois taxes paid on their Federal Schedule A. However, a few years back the IRS started to cap the taxes reported on their Schedule A to $10,000. And being in Illinois, we definitely go over the $10,000 limit with Illinois withholding, state income tax, and our real estate taxes.
So how does this work? Each year the entity makes an irrevocable election electing to apply the pass-through entity tax. The entity pays the 4.95% tax for the partner/shareholders and takes the deduction at the entity level. The deduction then lowers the income that is allocated to the partner/shareholder. Then the partner/shareholder claims a credit on their return for the taxes paid by the partnership/S Corp.
Any nonresident individuals where their only activity in Illinois is this K-1, do not have to file an Illinois individual income tax return.
Estimated payments are required. However, the publication does not lay out the specifics, and since this was signed into law so late we will have to see how they address estimate requirements for the first year.
If the partnership or S Corp files in other states that has a similar SALT PTE, Illinois will allow a credit for taxes paid to another state at the individual level.
This election may not be beneficial to all shareholders/partners the same way. Therefore, please review with your tax professional. If you have any additional questions, our Porte Brown tax team is here to help at 847-956-1040.
Effective January 1, 2023, sales tax rates for many municipalities located within Illinois will increase!
Please update your cash registers and computer systems to account for the change. Make sure your sales staff knows to adjust their quotes for the change in rates if materials are going to be purchased or delivered after January 1, 2023.
Nearby municipalities that have increased their rates are Libertyville-Lake County (+0.50%), Matteson-Cook County (+1.00%), Matteson-Will County (+1.00%), North Chicago-Lake County (+1.00%), Richton Park-Cook County (+0.50%), and Robbins-Cook County (+1.50%).
Other municipalities in Clinton, Coles, Jersey, Kane, Madison, Ogle, Richland, Schuyler, St. Clair, Wayne, Whiteside, and Winnebago counties have also changed their rates. Visit the Illinois Informational Bulletin for specifics on the business districts or municipalities impacted.
You can also log on to the Illinois Department of Revenue website and look up the sales tax rates through their Tax Rate Finder under the “Searches” category. https://mytax.illinois.gov/_/#2
Keep in mind, if you receive reseller certificate forms from your customers (CRT-61 https://www2.illinois.gov/rev/forms/sales/Documents/sales/crt-61.pdf), it is your responsibility to verify that their IBT number is valid. To verify a registered business, use this link to Illinois’ website and go to the “Searches” category. https://mytax.illinois.gov/_/#2
If you have any questions, please feel free to contact Kelly Switt, Bill Sebastiano, Ashley Trabaris, or Marie Straka at 847-956-1040.
If you have questions about the services we offer or would like to request a proposal, please submit the form below. Someone from the Porte Brown team will be in contact with you as soon as possible. You can also call us directly at 847-956-1040.
Get in touch today and find out how we can help you meet your objectives.