Berdon Blogs

SALT TALK:  I Read the (State Tax) News Today, Oh Boy

Written by Wayne Berkowitz CPA, J.D., LL.M. | Jun 12, 2017 1:20:00 PM

I read the state tax news every day. Fifty states, numerous localities and the thirst for revenue practically insures that Berdon will need me when I’m sixty four and beyond. Well, I just had to laugh when I read that the Beatles’ Sgt. Pepper’s Lonely Hearts Club Band album turned fifty years old last week.

I asked several colleagues if I may inquire discretely as to their views and experiences as to the current state of state taxation for nonresident athletes and entertainers. While some said, nothing changed, it’s all the same, and others commented that it’s getting better all the time.

Well, it is Friday morning at 9:00 and “Lucy in the Sky with Diamonds” is playing in the background. I’m reminded somehow of the Berdon tagline Listen, Solve, Do and am inspired to do just that. 

Even though virtually all jurisdictions have addressed the issue of withholding income taxes from nonresident entertainers and athletes performing or playing in the jurisdiction, some are still taking the attitude that it really doesn’t matter if I’m wrong or right and either simply going along with the jurisdictions general rules or ignoring requirements all together.

Especially with entertainers, many jurisdictions have mandatory withholding rules that will extract the assumed tax liability by requiring withholding at some fixed percentage from the amount paid to the performer. These methodologies often result in excess tax remitted since the general rule doesn’t consider specific expenses attributable to that performance or even consider the fact that maybe that particular show didn’t end up making a profit. 

With some planning, jurisdictions often will allow fixing a hole in which you may be leaving too much tax on the table.  Submission of even a rudimentary budget in advance can persuade the taxing authorities that the mandatory withholding rate may in fact be too high. When tax returns are ultimately filed, there will be a much closer match of the tax withheld to the actual liability and hopefully you won’t be getting a bill that Rita (or anyone else) has to pay.

If you have questions about withholding, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.