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Part of 7 points worth checking on state business tax
Which state business tax services cover your state
State business tax services: the five jobs someone has to own, where a CPA license stops at the state line, and how to coordinate providers without gaps.
Nobody sells one service for state business tax, because it is not one job.
Registering in a state, collecting its sales tax, withholding for its employees, filing its income or franchise return and keeping its annual report current are five jobs that different providers do.
The gaps between them are where the penalties live. No provider is paid to watch the gaps.
What to take away
- Map the jobs before you buy the services. Then ask each provider which jobs they do not do, and write the answers down.
- A CPA is licensed by one state at a time. Ask whether they practice in the states you touch, and how.
- Software collects and calculates. It does not decide whether you have an obligation. That decision belongs to a professional, and the rule belongs to the state.
- Nothing here states any state's requirement. The department of revenue publishes it; a CPA licensed there applies it.
- CT Corporation, CSC and Harbor Compliance sell the registration and annual report jobs in all fifty states. Avalara, TaxJar, Gusto, ADP and QuickBooks Payroll cover sales tax and withholding. Each one sells a defined slice.
Five jobs and who usually does them
Usually done by
- Registering the entity to do business
- A registered agent or formation service such as CT Corporation, CSC or Northwest Registered Agent, or your attorney
- Sales tax registration, collection and filing
- Tax software plus you, such as Avalara or TaxJar, or a preparer
- Withholding and unemployment
- A payroll provider such as Gusto, ADP or QuickBooks Payroll
- Income, franchise and gross-receipts returns
- A CPA or enrolled agent
- Annual reports and renewals
- A registered agent such as Harbor Compliance or ZenBusiness, or nobody
What to confirm
- Registering the entity to do business
- Whether they also register you with the department of revenue. Those are different filings with different agencies
- Sales tax registration, collection and filing
- Who decides which states to register in. The software will not
- Withholding and unemployment
- Whether they register you in a new state when you hire there, or only file once you have done it yourself
- Income, franchise and gross-receipts returns
- Whether they prepare returns in that state routinely, or once in a while
- Annual reports and renewals
- Whose calendar it is on. This is the job most often on no one's
The dangerous answer to any "what to confirm" question is "I assumed you were doing that." Get it in writing, from each provider, which of the five they do and in which states.
CT Corporation and CSC both sell the first job and the fifth. Avalara and TaxJar sell the second. Gusto, ADP and QuickBooks Payroll sell the third.
Five Jobs and Who Owns Them
- Entity registrationagent, formation service, or attorney
- Sales taxsoftware plus you, or preparer
- Withholding and unemploymentpayroll provider
- Income, franchise, gross-receiptsCPA or enrolled agent
- Annual reports and renewalsregistered agent or nobody
Which state business tax services cover which states
The companies below sell the five jobs in pieces. Prices are listed where the company publishes them, and quoted otherwise. State filing fees come on top.
| Provider | Jobs it sells | States covered | Cost |
|---|---|---|---|
| CT Corporation (Wolters Kluwer) | Registration, registered agent, annual reports, license research | All 50 states and DC | Quote-based; registered agent service commonly a few hundred dollars a year plus state fees |
| CSC (Corporation Service Company) | The same set, plus a compliance calendar | All 50 states and DC | Quote-based, same range |
| Harbor Compliance | Registered agent, annual reports, license filing | All 50 states | Registered agent typically $99 to $300 a year; annual reports billed per filing |
| Northwest Registered Agent | Registered agent, formation, annual reports | All 50 states | Registered agent listed at $125 a year; annual report filing is separate |
| ZenBusiness | Formation, registered agent, annual reports | All 50 states | Registered agent typically around $199 a year |
| Avalara | Sales tax registration, calculation, returns filing | Every state with a sales tax | Quote-based; usually a subscription plus a per-return fee |
| TaxJar (Stripe) | Sales tax calculation, reporting, AutoFile returns | Every state with a sales tax | Plans typically $20 to $200 a month by volume |
| Gusto | Payroll, state withholding registration and filing | All 50 states | From $40 a month plus $6 per employee; some registrations cost extra |
| ADP | Payroll, state registration, unemployment claims | All 50 states | Quote only; rates are not published |
| QuickBooks Payroll (Intuit) | Payroll with state withholding filing and notices | All 50 states | From about $40 a month plus about $6 per employee |
Sales tax coverage stops where a state has no sales tax. Delaware, Montana, New Hampshire and Oregon levy none at the state level, and Alaska leaves the tax to local jurisdictions. Avalara and TaxJar file in the other forty-five states, plus Alaska's local returns.
Income and franchise returns are the row with no software-only answer. Firms that advertise multi-state work include Withum, Baker Tilly and Aprio, and Ryan LLC serves larger companies. They run Thomson Reuters ONESOURCE or Wolters Kluwer CCH Axcess, both of which support every state with a corporate income tax. A CPA or an enrolled agent signs.
None of these companies will tell you that you owe a state money. Avalara files a return for a state you name. It does not name the state for you.
Where licenses and coverage run out
A CPA's license is issued by a state board. Rules on practicing across state lines exist and vary, and this page will not state them. The useful question is whether the firm signed returns for that state last year, and how many.
An enrolled agent is licensed federally, so the credential travels to every state. Whether the agent knows that state's quirks is a separate question. An attorney is admitted to a bar. The National Association of Enrolled Agents publishes a directory of enrolled agents by state.
Ask each provider about the states on your footprint list by name. A pause before the answer tells you something.
What a good service refuses
- To register you in every state "to be safe". Registration creates filing obligations that do not go away when the reason does.
- To guess at nexus. A nexus review is a piece of work with a written result, not an opinion offered on a call.
- To backdate a registration.
- To file zero returns to make a notice go away without first finding out why the state thinks you are there.
- To treat your federal classification as the state answer. The entity tax treatment page explains why states diverge.
- To promise that software has "handled" a state. Software files what it is told; someone has to tell it.
The interview
- Which states did you file business returns in last year? Which ones are new to you?
- If I hire someone in a state where I have never filed, what happens, and who notices?
- Who inside your firm handles sales tax, and is it the same person who handles the income return? The sales tax side is usually where firms hand off.
- How do you find out when a state changes a rule?
- What do you do with a notice from a state I have never heard of?
- Which of the five jobs are you not doing for me?
Ask the same six questions of a payroll company and a software vendor. The answers will be shorter, and "we file what you configure" is the one to expect.
The IRS page on choosing a tax professional is written for federal returns. Once state lines are involved, every question on it applies twice over. It also explains how to verify a credential before you rely on it.
Coordinating the providers
The costliest failure is two adequate providers each assuming the other registered you.
The fix is dull: one document you keep, listing each state, each obligation, and the name of whoever is responsible. Review it whenever your footprint changes or a provider changes. A column for the provider's written confirmation is worth more than a column for their name.
The payroll tax overview describes the registrations that most often fall between a payroll company and an accountant.
Where to check
| Source | Use it for |
|---|---|
| The state board of accountancy | Whether a CPA's license is active in that state |
| The IRS preparer directory | Whether a credential is current |
| Each state's department of revenue | The obligation itself, in the state's own words |
| Each state's secretary of state | Annual report due dates and entity records |
| Your own footprint document | Which jobs exist to be assigned at all |
Reaching the states themselves is the part people give up on. The IRS keeps a directory of state government tax sites that goes straight to the department writing the rule your provider will be applying.
The state business tax overview explains the obligations these providers are dividing between them.
Common questions
Can one firm do all five jobs?
Some can. Ask which ones they subcontract, because the gap moves inside the firm rather than disappearing.
Is a national franchise safer than a local accountant for multi-state work?
Neither is safer by type. Ask both the same six questions and compare the specificity of the answers.
The payroll provider says it handles state registration. Does it?
Read the service agreement for the word "register". Gusto and ADP both register employers in new states on some plans, and both leave it to you on others. Many providers file in states where you are already registered and leave the registration itself to you.
What if a state sends a notice to a provider and not to me?
Ask every provider, in writing, to forward every notice the day it arrives. The tax deadlines that matter most are the reply dates on notices nobody told you about.
Do any of these companies cover all fifty states?
The registered agent firms do, for entity filings and annual reports. The payroll firms do, for withholding and unemployment. Avalara and TaxJar cover every state that levies a sales tax. None of them covers nexus.
