Recent Updates for State and Local Reporting

State and local tax (SALT) reporting has undergone significant change in recent years across several key areas. Payroll tax withholding rules have been updated in numerous states to address remote and hybrid work, with new standards emerging for determining which state's tax applies when employees work across multiple jurisdictions. Sales and use tax nexus standards continue to evolve following the Supreme Court's South Dakota v. Wayfair decision, expanding economic nexus thresholds that require businesses to collect and remit sales tax in states where they have no physical presence. State income tax conformity to federal law varies significantly and changes frequently as states selectively adopt or reject federal tax legislation. Mandatory paid leave laws have expanded to new states and cities, adding payroll tax contribution requirements. Staying current on these changes requires ongoing monitoring of state legislative and regulatory activity, making continuing education in SALT compliance essential for accounting professionals.

The widespread adoption of remote and hybrid work has created significant complexity in state and local tax compliance for both employees and employers. When employees work from states different from their employer's location, they may create nexus in those states for income tax withholding, unemployment insurance, and potentially business activity taxes. The employer may be required to register in those states, withhold the applicable state's income tax, and comply with local wage and tax reporting requirements. The convenience of the employer rule — applied by states like New York, Nebraska, and Arkansas — requires employees to pay tax to their employer's state even when working remotely, unless the remote arrangement was mandated by the employer. Reciprocity agreements between some states simplify multi-state withholding for employees who cross state borders, but not all states participate. HR and payroll professionals must maintain accurate records of where employees are actually working to ensure correct multi-state tax reporting.

State tax conformity refers to the degree to which a state's tax code incorporates federal tax law changes automatically or selectively. Many states use federal adjusted gross income or federal taxable income as the starting point for their own tax calculation, but they do not always adopt federal changes. When Congress enacts federal tax legislation — such as depreciation bonus rules, exclusions, or deductions — states may accept it automatically (rolling conformity), adopt it as of a specific date (fixed-date conformity), or not adopt it at all. This creates situations where a taxpayer's federal and state taxable income differ for the same transaction. For example, a state that did not adopt enhanced bonus depreciation provisions requires separate depreciation calculations. Accounting professionals advising multi-state clients must track which states have adopted which federal provisions to avoid errors in state return preparation, particularly after major federal legislation that includes numerous changes with variable state conformity.

Following the U.S. Supreme Court's 2018 ruling in South Dakota v. Wayfair, every state with a sales tax adopted economic nexus standards that require remote sellers to collect and remit sales tax once they meet a threshold in a state — typically $100,000 in sales or 200 transactions annually — regardless of physical presence. This fundamentally changed the compliance landscape for e-commerce businesses and any company selling across state lines. States continue to refine their economic nexus rules, marketplace facilitator laws, and product taxability definitions, making ongoing monitoring essential. Businesses that have not yet assessed their multi-state sales tax exposure risk significant back tax liability, penalties, and interest. Voluntary disclosure programs offered by most states allow businesses to come into compliance prospectively with limited lookback periods and often reduced penalties. Regular compliance reviews and the use of tax automation software help businesses manage the complexity of varying state and local sales tax rules.

State and local tax law is one of the most dynamic and jurisdiction-specific areas in all of accounting and tax compliance. Unlike federal tax law, which is administered through a single uniform set of regulations, SALT involves 50 states, the District of Columbia, and thousands of local taxing jurisdictions — each with its own rules, rates, due dates, filing requirements, and enforcement practices. Legislative sessions produce new tax legislation annually; courts issue rulings that redefine nexus, sourcing, and taxability standards; and administrative agencies release guidance that changes compliance requirements with little advance notice. Accounting professionals who do not actively maintain current SALT knowledge risk advising clients incorrectly, missing filing deadlines, and exposing their firms to liability. Continuing education webinars focused on SALT updates provide an efficient, targeted way to stay current across the most important changes affecting the clients and jurisdictions an accounting practice serves.