Recently I wrote about how businesses quietly become multi-state. But once you’ve determined that, you may be asking, “Okay… so what exactly should I be keeping track of?!”
That is a great question, and like so many accounting questions the answer is: “it depends.” Every state has its own rules, its own forms, and its own thresholds, and most don’t provide you with a tidy checklist on the way in. The good news is that while the specifics differ state to state, there are a number of principles you can follow that will help set you up for success!
Here’s are the top things I recommend keep track of:
- Revenue by state – If you sell a product make sure to keep track of your sales by the state where the product was delivered to. If you perform work on-site for your customers, track sales by the state the work was performed in. And if you provide digital or remote services, you’ll track sales by the state the customer is located in (or for large customers, what state the department who received the ervices is located in).
Recommendation: The easiest way to track this is often in your accounting software (e.g. QBO; Xero; etc.). Make sure that every customer has a full mailing address in their profile. If you do work for a customer in multiple states, setup different customer profiles or different projects.
- Payroll and people by state – Keep a record of where each employee lives, and where they actually perform work. If your company sells digital or remote services and an employee works from home, then the state where they live & work will be the same. For those where employees often travel to perform work, it can take a little more work.
Recommendation: Make sure you’re using a robust payroll service (e.g. ADP; Gusto; etc.) that can help you track wages by state for each payroll. This will make it very easy at year-end to run reports to show you wages-by-state. - Travel and job-site days – In addition, if executives or salesmen frequently travel out of state to visit clients, prospects, attend trade shows, etc., be sure you keep track of 1) which state they’re in, 2) which days, 3) who they visited, and 4) the business purpose for the trip.
Recommendation: Have each person keep a simple spreadsheet, or log book, to track their travels. At the end of each quarter, they can turn that in to accounting.
- Property and equipment by state – Be sure to keep track of where you own or lease offices, where equipment is stored or used, and where you keep inventory or materials.
Recommendation: A simple spreadsheet is often the best way to track all of this. Try and collect all property tax bills, leases, bills, and any other expenses associated with these locations, and keep them in one folder. This makes it easy to re-produce if ever needed.
- State registrations and filings – Keep a master list of every state you’re registered in, when your annual report is due, and any other filing deadlines.
Recommendation: Using a professional registered agent service for this is far and away the easiest way to keep this all organized, and to help with take care of any paperwork. - Sales tax – If you collect sales tax, be sure to also keep track where you have nexus, and keep track of any exemption or resale certificates organized.
Recommendation: In addition to good accounting software, using a sales tax platform like Avalara is the easiest way to track compliance with sales tax.
As you can see, most of these things are very straight-forward. By setting up solid software systems and couple of spreadsheets, you can keep your data updated as things change rather than scramble to get everything together at year-end. What I’ve seen time and again is that the companies that handle multi-state well aren’t doing anything complicated, they’re simply consistent.
If you start by tracking sales, payroll, travel, property, registrations, and sales tax by state, you’ll be well on your way to creating a solid set of records that will help making future filings go smoothly. However, if this feels like a lot, or you’d like a professional analysis of what you should be tracking for your specific mix of states, that’s exactly what I’m here for. Reach out and we’ll build you a system that fits — before a state comes asking.
