Usually 'rocking the boat' is perceived to be a bad thing, but 'rocking the boat' can be a good thing. Let me explain.
If you are riding in a boat heading into a storm and the boat starts rocking, that is usually a bad thing or scary. The boat is rocking to due to some external force or environmental change.
If someone on your boat gets up and starts jumping around without any explanation and you can't stop them or talk with them, that is usually a bad thing.
But if the the captain of the boat purposely turns the boat, changes direction and heads into the storm, then the rockiness of the boat is a good thing. It means the boat is going in the right direction. A strategic, purposeful direction. The rockiness is part of the process of reaching the chosen destination.
If someone on the boat gets up and voices a concern with the current direction of the boat, and makes a valid point why the boat should change course, the rockiness of the boat is a good thing. A necessary thing.
I'm sure we could keep going with this analogy or you could make up better analogies, but you get the point. Change, upheaval, incurring resistance or turbulance is sometimes a necessary or required part of the process of achievement or improvement.
HOW DOES THIS APPLY TO STATE TAXES?
2024 just began. January already gone. State governments have started or will be starting their legislative sessions. Proposals are flying all around. This is in addition to the state tax law changes that were enacted last year that became effective in 2023 or as of January 1, 2024. On top of the state legislative proposals, we also have federal legislation that is moving through the House and Senate that will have ripple effects on the states regarding research and development expenses and other items (appears to have a high probability of passing). The SALT CAP (i.e., state tax deduction limit of $10,000) is proposed to double to $20,000 (based on commentary, this legislation has a low probability of passing). As with all federal tax legislation, some states automatically conform, and some states don't conform until they specifically say they do.
All of these changes can 'rock the boat' of your business.
These are external changes that you don't have control over. You may be able to influence them (or some people may be able to), but for most companies, their 'boats' get rocked and they have to learn how to change course to find calmer waters.
Some state tax issues or items that are currently being challenged or expected to become bigger issues in 2024 that could 'rock your boat':
More states to adopt state income tax exconomic nexus thresholds
The protections of P.L. 86-272 continue to be challenged and worked around.
Gross receipts taxes (Ohio, Washington, Tennessee, Oregon, Nevada) continue to change their rules.
Sourcing sales of services or intangibles for income tax apportionment purposes continues to be more confusing with market-based sourcing - do you source to your customer or your customer's customer?
How do you source the gain on the sale of your partnership interest?
Should my company really make pass-through entity tax (PTET) elections in all states where we can?
Do I really owe the California LLC fee or minimum tax based on my ownership in a California LLC?
Am I required to file a state income tax combined return?
Should I make state income tax elective consolidated return elections?
Will the Washington capital gains tax survive challenges and should I pay it?
Does everyone have economic nexus for income tax purposes if the state has no 'factor presence' threshold?
Can a telecommuting employee that does 'back office' functions create nexus but a telecommuting employee that solicits sales be protected by P.L 86-272?
Is SaaS considered tangible personal property or a service for state income tax apportionment purposes?
Does P.L. 86-272 apply to sales of SaaS?
How can a company realistically source sales of SaaS when the users are in multiple states and the buyer doesn't provide the data?
Are state 'throwback' rules constitutional?
Should market-based sourcing really create economic nexus?
I could keep going, but I will stop.
CONCLUSION
External forces will always 'rock a company's boat.' However, even if the boat isn't currently rocking, a taxpayer or a tax consultant may need to stand up in the boat to advise or ask the captain of the boat to change directions. The goal is to adapt to the wind or to change the direction of the boat so the company can move towards calmer waters or avoid the storm altogether.
Unfortunately, the constant change in federal and state tax legislation and court cases and rulings, makes it difficult for the waters to stay calm very long.
The best strategy for a company to thrive in this type of environment is to monitor changes, make informed decisions and most of all - be proactive. Don't wait until your in the middle of the storm.
You can always navigate out of the storm, but the damage to the boat will differ based on how quickly you change course.
Here's to smooth sailing.