3 State and Local Tax Resolutions for 2022

December 13, 2021

Businessman showing concept of taxes paid by individuals and corporations

By: Jeff Glickman, SALT Partner

At a glance

  • The main takeaway: Addressing state and local tax risks and savings opportunities can help your business get into the best possible position for 2022.
  • Set your resolutions: Start by updating your state tax nexus study, reviewing payroll tax compliance and considering PTE tax elections.
  • Get help where you need it: Contact Aprio’s State and Local Tax (SALT) team for help with tackling your SALT resolutions for the new year.

Schedule a free consultation today to learn more!

The full story:

As the new year approaches and we begin thinking about our personal and professional goals, let’s not forget about state and local tax (SALT) resolutions. Reducing tax risks and identifying opportunities for savings will help your business achieve the best “SALT health” for 2022.

Below are a few SALT resolutions that we recommend addressing to begin the new year.

  1. Get (or update) a state tax nexus and taxability study

This one never really goes away, right? There are two reasons for this: first, the nexus and taxability rules are continually evolving, and second, your business activities are constantly changing. Therefore, it’s important to conduct an initial nexus study if you have not done so already — and if you have, an update may be worthwhile. Below are some technical updates from the past year:

Sales tax

In 2021, the last holdout states — Florida, Kansas and Missouri — enacted sales tax economic nexus provisions, although Missouri’s rule does not go into effect until January 1, 2023. Our Wayfair webpage provides valuable information, including each state’s economic nexus threshold and effective date, as well as access to all of the articles we have written over the last few years and to our video webinar.

As is typically the case with SALT matters, each state differs in how it applies these thresholds, most notably with respect to the types of sales that are included in the calculation of the threshold. For example, some states include all sales whereas others may only include taxable sales. Therefore, in order to undertake a sales tax economic nexus analysis, it is necessary to understand the taxability of each revenue stream. Given the technological advances and changes in the way that businesses provide goods and services, this analysis is often the most complex part of the nexus study.

Income tax

One notable change with regard to income tax nexus is the recent adoption by the Multistate Tax Commission of changes to its “Statement of Information Concerning Practices of Multistate Tax Commission and Supporting State Under Public Law 86-272.” We summarized these changes in an article from our September 2021 SALT Newsletter, which will likely impact companies that conduct business through their websites. We will continue to monitor how states incorporate these developments.

  1. Review your payroll tax compliance

Over the last couple of years, as a result of the COVID-19 pandemic, workers moved to new states and employers started hiring remote workers, recognizing that their employees could work from almost anywhere. The result is that employers are creating a workforce that is more geographically diverse. From a SALT perspective, this creates more complexity regarding compliance surrounding payroll withholding and unemployment taxes.

In addition, during the pandemic, many states provided payroll tax and nexus relief for employees who relocated to and worked from their states as a result of a governmental emergency or shutdown order. That relief may have expired, but some employees continued to work from those locations, so employers could have new payroll tax obligations in those states.

Now is the time for employers to reassess where their employees are working in order to ensure that they comply with their payroll tax obligations. This analysis will also provide valuable information with respect to state nexus (discussed above), since employees’ presence will generally create state income and sales tax obligations.

  1. Consider making state pass-through entity tax elections

Over the last several years, states have been enacting pass-through entity taxes (PTE taxes) as a workaround to the federal $10,000 cap on the state and local tax deduction. Following IRS Notice 2020-75, which approved the federal deduction for pass-through entities that paid PTE taxes, several new states enacted these taxes so that there are currently 21 states with PTE taxes — 15 of which are applicable for 2021 and earlier tax years. Six more states will be applicable beginning with the 2022 tax year.

We have written extensively about PTE taxes,[1] in particular to highlight the differences in how they apply, such as:

  • Which pass-through entities (PTEs) are eligible to make the election to pay PTE taxes (Connecticut continues to be the only state where PTE taxes are mandatory).
  • How income subject to PTE tax is calculated.
  • The timing for making the election.
  • How PTE owners calculate their income tax liability (i.e., do they get a credit for PTE taxes paid at the entity level or an exclusion of income subject to the PTE tax?).
  • Whether residents are entitled to a credit or an adjustment for PTE taxes paid to other states.

Now is the time for PTEs to address whether to make an election to pay PTE taxes in any state. However, this is not a “one-size-fits-all” analysis; it is influenced by where the PTE conducts business as well as each of its owner’s state of residence. In addition, some partnerships may need to amend their existing partnership agreements in order to properly account for these PTE taxes, and those amendments may need to be made by March 15, 2022, in order to be applicable to the 2021 tax year.

Aprio can assist your business with these important SALT resolutions for 2022. Contact us to learn more about how we can help.

We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This content was featured in the November/December 2021 SALT Newsletter.

[1] [1] See these articles from our SALT Newsletters: (1) May 2018 – New York and Connecticut Enact SALT Deduction Cap Workarounds Not Involving Charitable Contributions; (2) Sept. 2019 – Massachusetts Will Allow Residents to Claim Tax Credit for the Connecticut Pass-Through Entity Tax; (3) Nov./Dec. 2020 – IRS Approves Deduction for Entity-Level Income Tax Payment Made by Pass-Through Entities; (4) April 2021 – New York and Georgia Legislatures Enact Pass-Through Entity Taxes; (5) August 2021 – California Enacts a Pass-Through Entity Tax a SALT Cap Workaround; and (6) October 2021 – Making a Pass-Through Entity Tax Election? Beware: Some Owners May Pay More Tax.


Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.