A good tax partner will prepare a business to be proactive about its taxes — not scramble to react to every new compliance ordinance or annual filing deadline. At least, that’s the philosophy Rockville-based Aronson likes to take with its clients.
“Our job at Aronson is not to be a tax historian, but a proactive partner,” said Tom Christiana, a partner in Aronson’s tax services group. Aronson is a business advisory firm, and its services include taxes, consulting, risk advisory and assurance. The firm has tax specialists specifically dedicated to helping clients in the tech industry.
Christiana is among one of three advisors at Aronson who spoke to Technical.ly about the intricacies of tax services for tech clients. Christiana has 20 years of experience in the tax industry and heads Aronson’s corporate tax compliance sector serving tech companies. Fellow Tax Services Partner Alison Dougherty heads Aronson’s international tax division, and Michael Colavito is the director of the firm’s state and local tax practice.
Why do tech businesses need a tax partner?
A common theme connecting tech clients that Christiana noticed is the passion they have for their own business model, but a lack of resources to host an in-house tax professional on their team. That’s where Aronson comes in.
Even if a tech business has been successfully running, a tax partner is valuable at every stage of the company’s life cycle, he added. Aronson has a comprehensive suite of services that can assist a tech business at its inception when it’s receiving early funding, when it’s preparing for an acquisition or when it’s planning an exit.
In the state and local sector, one of Colavito’s recent clients is a SaaS provider to nonprofits. Aronson began to assist the firm after it was operating for a couple of years and selling products to clients in multiple jurisdictions. Upon partnering with Aronson, Colavito started conversations with the client about what localities they should have been collecting sales tax in.
Ideally, Aronson will begin working with a tech startup at the ground level to ensure the right processes are in place, Colavito said.
“But that’s not always the case,” he added. “Once a business has been in operation for a couple of years, we do have the capability and knowledge to point out the dollars and cents of penalties in certain states and help them make the decision as to what they want to do about it without being in too much of a reactive mode.”
What trends should tech businesses be aware of?
All three tax partners noted the significance of the 2018 U.S. Supreme Court decision, South Dakota v. Wayfair, which overturned a 1992 ruling by the Court.
The South Dakota v. Wayfair decision allows states to require and collect taxes on businesses with no physical presence in the state to collect sales tax on in-state sales. Typically, businesses must meet certain sales quotas and/or a certain number of transactions before being subject to a collection obligation.
Due to this federal ruling, Colavito has seen an increase in the number of states that impose sales tax on software providers and tech businesses. In March 2021, Maryland joined that roster and now imposes a 6% tax on SaaS and digital products.
Globally, Dougherty sees similar challenges regarding international tax for clients expanding their international footprint. As a reflection of this industry trend, the Organisation for Economic Co-operation and Development, a global policy organization, has been encouraging countries to implement a tax on digital services for companies whose services and products are being accessed globally.
“Companies that previously did not have a physical presence in some countries are beginning to fall within the scope of a foreign taxing jurisdiction as a result of online electronic internet sales to customers and subscribers in foreign countries,” she said. “This is a major change to the concept of taxable presence in many countries.”
How does Aronson help?
For the tax advisors at Aronson, it’s not a question of if tech businesses will have to figure out a way to respond to new compliance rules and industry changes — they will. It’s how to choose the right tax partner.
“Aronson has an integrated solutions-oriented approach to leveraging its core specialty and niche industry service offerings in tax, audit, and consulting,” Dougherty said. “This is what distinguishes and differentiates Aronson in the marketplace.”
It’s also a question of how companies will remain compliant as they grow and expand, Dougherty added. With subject matter experts in different tax sectors — such as federal, corporate, state and local, and global — “Aronson offers technical strength in international tax, state and local tax, estate, gift, and trust tax, employee compensation and benefits, tax controversy and advocacy, and transaction advisory including mergers and acquisitions,” she said.
At the end of the day, Christiana said Aronson’s services come down to its open communication style and continuing education with clients, so they understand what tax changes are pulling on their business.
“We really fill that function for them, so they are able to make the best business decisions”, he said.
”That’s because we understand their business and promote timely communication, that allows us to be proactive and have them poised for the future with the most tax-efficient structure.”