Tagged business travel

Concur Fusion Microforum

Tax Risks Are A Key Issue For Concur Fusion Attendees

Last month, hundreds of Concur clients and partners convened in Las Vegas for three days of workshops, panels, and roundtable discussions about managing the travel challenges created by employees on the go. As a Concur partner, Monaeo led discussions on how companies can best manage the tax risks created by their business travelers.

The Global Business Travel Association predicts that business travel spending in the U.S. alone will grow 3.2% in 2016. Business travel means growth for companies – but it can also mean costly tax exposures.

Every time company employees cross state or country borders they can create tax liabilities. That’s because each jurisdiction has its own unique set of rules for when non-resident workers are required to pay taxes. In New York, for example, a company is responsible for withholding payroll taxes for non-resident employees who work in the state for more than 14 days in the calendar year.

For Fusion attendees, tax compliance was a big issue. At a microforum on tax risks, Monaeo co-founder Nishant Mittal led a group discussion of how companies are tackling this issue – and the challenges they are facing. As we listened to participants tell stories of the pain that their travel and finance departments were experience because of tax risks, a few patterns emerged:

Companies of all sizes are facing this issue

One attendee spoke about how her company had recently undergone a state audit. The company wasn’t large compared to many Concur clients – in fact, it had fewer than 500 employees – but it was a consulting firm where many employees spent the majority of their time on the road. The audit had cost the firm significant funds, but the employee was equally upset about the drain on her team’s time. “I have a spreadsheet with 50 tabs that I use to keep track of this,” she explained. Not only were such manual methods time-consuming, she had to be vigilant about expensive errors that could arise from a single mistyped number.

It’s not just New York

It’s unquestionable that New York pioneered the widespread withholding tax audit. However, as technology advances and companies increasingly have digital records, more and more states are following suit. We heard stories of companies being audited not just in New York, but also by Connecticut, Philadelphia, Georgia, California, and numerous other states and localities.

The fees and penalties can continue after the audit is finished

One attendee discussed how her company was still paying fees and penalties years after the audit. Companies may also find themselves being audited in subsequent years. Audits can also “spread” – often a state audit of one company will lead to audits of that company’s primary partners or vendors.

What can travel managers do when confronted with these risks? The first step for any company is to understand your risk. For those companies that use Concur, existing travel and expense data can be a rich source of information. Once you understand where you have exposures and how large those exposures are, then your company is well-armed to manage and reduce those tax risks.

Interested in learning more about how Monaeo’s Risk Analyzer can quickly and accurately quantify your tax exposures? You can request a free consultation here here.

Nexus

4 Key Questions About Nexus

An article in Forbes asked, “Why is multi-state tax compliance so hard?

One answer to that question can be found in a single word: nexus. The most thought-provoking sessions at the Tax Executives Institute Region VIII conference last month covered the gray areas of state nexus. Below are 4 key points that the panelists highlighted:

  • Do you want nexus or don’t you? One session began with this simple question. In general, tax executives try to manage away from nexus. You try to limit the employees and properties that you have in other states. But, one speaker argued, sometimes nexus can be good. If you’re already planning to enter a state within the next few years, you may want to claim nexus now. Why? Because claiming nexus can give you the right to NOLs (net operating losses) in that state. Of course, this takes planning ahead and knowing what your operations are going to do a couple years in advance.
  • The right to apportion. What if most of your operations are in one state and you happen to not have nexus in any other states? If you had the right to apportion, perhaps you can more proactively manage your taxes across states.
  • Filing methodologies. Consider the different filing methodologies you can elect. Around half the states allow some form of elected consolidation or accommodation. As you evaluate filing methodologies, it’s important to keep in mind elected consolidation, accommodation, apportion and nexus.
  • How does the state define business income? In some instances, courts have found that the definition of what qualifies as income doesn’t include a functional tax, and then a state has to amend its statute. There are multiple factors to consider here, not just marketing sourcing.

All of the speakers agreed that its critical to understand where you have nexus and where you don’t. If you’re claiming nexus, make sure that you have the economic substance in a state to legitimately create nexus. In some instances, states have gone after companies for falsely claiming nexus.

For more information on how business travel can create nexus and managing those risks, download our free whitepaper “On the Road and at Risk”