4 ways SALT technology helps all year

ARTICLE | February 14, 2024

Authored by RSM US LLP

Effective state and local tax (SALT) compliance is a year-round proposition. Sure, there are statutory deadlines, but corporate and partnership tax compliance extends beyond filing state income tax returns.

State provisions, estimates, opportunity implementation and risk identification are just some of the activities that require attention year-round. Companies that prioritize SALT compliance throughout the year—rather than just once federal needs have been resolved—will find more time to spot opportunities and mitigate risk.

Compliance is a challenge. However, you can leverage SALT technology to enable you to prioritize compliance year-round—and reduce deadline anxiety when it comes time to file.

Here are four ways SALT technology can help:

1. Reduce inefficiencies and redundancies

Technology can streamline tax compliance processes for corporations and partnerships, starting with tax data gathering. Online document management and storage platforms can provide all necessary parties with direct access to the same information. This can eliminate the need to consult with multiple parties for information for a tax return and the creation of additional versions of documents that lead to errors.

"This approach reduces some of the overall repetitive requests and some of the internal frustration within an organization. If you've got that centralized repository or that single source of truth, then everybody knows to go there first and look for what they need"

Sherri York, RSM state and local tax partner

Companies can also save time by leveraging optical character recognition or other machine learning tools to read and import tax data from lengthy documents, like state Schedule K-1 packages.

Although the implementation of tools that extract  transform and load data might seem daunting, it can save time in the long run. With proper training, team members can use technology to transform raw apportionment data into the import templates that work for specific client needs, saving time and improving accuracy.

2. Mitigate risks that stem from manual tax data entry

Manual data entry inherently introduces the likelihood of keystroke errors or missed information. This underscores another benefit of technology that can import and compute data and maintain a single, shared source of truth.

"When you use enterprise-wide technology to perform calculations, as opposed to creating one-off workpapers client by client, you're mitigating risk by leveraging a standard set of SALT rules."

Phil Gaeta, RSM state and local tax senior manager

By utilizing software to standardize tax data, companies can reduce the risk that comes with human error. Another way to reduce this risk is by ensuring your software programs can interact with each other. For example, connecting document management and storage platforms to your tax software via an application programming interface can allow for data to be transferred automatically in the final format needed for filing.

3. Streamline the communication process

A shared online tax platform will enable you to stay connected to teammates with less back and forth.

A dynamic web-based document management system may provide the ability to create customizable dashboards, which can keep your team on the same page with a single glance. For example, corporations tracking e-file acceptances can monitor a tracker in the system that speaks directly to your tax software. Additionally, having better visualization of all tax data can help you spot and communicate opportunities with stakeholders more effectively.

On the partnership side, the collection of investors’ personal identifiable information for reporting can be a cumbersome process lasting weeks or months. However, this can be automated with a secure investor portal that enables partnership entities to share and receive tax data with investors.

4. Free your people to proactively add value

Technology can also enable your tax function to be proactive while approaching tax compliance. This can be done in a variety of ways:

  • Make the most of your tax data: With a purpose-built application for tax that handles and standardizes tax calculations, your data will be available for other valuable activities and outputs, such as analytics, forecasting and estimates.
  • Ensure compliance upfront: Companies commonly benefit from employing a nexus study or a dedicated review of activities that helps identify the jurisdictions in which they have tax exposure or opportunity. While the nexus study traditionally can take months, a technology-enabled nexus solution, for example, can provide insight about potential tax exposure or opportunities in minutes.
  • Optimize your tax position: The unique access to tax data that integrated software offers may also help you prevent or prepare for changes that can affect your company's tax position. Technology can be leveraged to forecast the potential effects of business decisions—anything from investment opportunities to hiring in specific states—on an entity's tax liability. For example, a technology-enabled nexus solution may allow for immediate updates to determine the potential state tax impact of a proposed business decision.

"Employing a nexus study early on in the process keeps you from mitigating issues downstream. And technology can get you to the decision-making process very quickly."

Joe Gilley, RSM state and local tax senior manager

The takeaway

SALT compliance will never be without challenges. However, integrating technology into your tax compliance processes can help you reduce some of its inherent speed bumps; this commonly creates more time for planning and scoping opportunities. When you and your tax advisor combine technology with deep technical knowledge of SALT issues, you will be better equipped to prioritize compliance year-round and optimize your tax position.

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This article was written by Sherri York, Nicole Rooney, Joe Gilley, Phil Gaeta and originally appeared on 2024-02-14.
2022 RSM US LLP. All rights reserved.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

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