Key takeaways
- Post-Wayfair compliance creates opportunity: Many businesses still struggle to manage sales and use tax obligations, opening the door for firms to expand into SALT advisory.
- Building a SALT practice adds value and revenue: Offering nexus studies, registrations, VDAs, and audit defense helps firms strengthen client relationships while generating recurring income.
- Technology and automation are key to scale: Using tools that analyze nexus exposure and streamline compliance enables firms to deliver efficient, high-margin advisory services.
In short: Accounting firms can scale a profitable state and local tax (SALT) practice by offering comprehensive sales and use tax (SUT) advisory. Since South Dakota v. Wayfair, many clients face economic nexus rules they do not understand. Services like nexus studies, registrations, VDAs, taxability analysis, and audit defense bring both episodic and recurring revenue.
Building up a state and local tax practice can help firms better serve their clients.
In South Dakota v. Wayfair, the U.S. Supreme Court affirmed states' rights to collect sales tax on online purchases. Many states then moved quickly to enact laws like South Dakota's to collect sales tax on remote purchases.
Few companies selling online understand economic nexus rules or can manage their own sales and use tax compliance. Their accountant may not be reviewing sales tax or handling reporting and compliance for them. If so, they may wrongly assume it's not an issue. That lasts until they receive a nexus questionnaire from a state where they have no physical presence and haven't been collecting sales tax.
This mix of changing laws and client need creates big opportunities for firms to add or expand a sales and use tax advisory practice.
What is economic nexus?
Economic nexus is a duty to collect sales tax in a state based on sales into that state, even without a physical presence there. Each state sets its own threshold.
South Dakota, the state at the centre of Wayfair, is a typical example. Remote sellers must register and collect tax if their gross sales into the state exceed $100,000 in the previous or current calendar year. South Dakota dropped its second test, 200 or more transactions, on July 1, 2023, according to the South Dakota Department of Revenue.
Why Scale a SALT Practice?
Scaling a SALT practice lets firms bring sales tax work in house and earn significant episodic and recurring revenue. Many firms outsource their clients' sales tax work today. That is often because they don’t have a tax accountant on staff or the right technology to offer SUT advisory. Many firms overlook this advisory side.
What Is the Best Way to Scale a SALT Practice?
The best way to scale a SALT practice is to offer clients comprehensive sales and use tax advisory. Here are the top services firms can offer to help their clients be SUT compliant:
Nexus Survey
A nexus survey determines whether or not a business has economic nexus in a state.
Nexus Exposure Analysis
A nexus exposure analysis automates the complex work of analyzing a client’s transactions to find where economic nexus has been reached. It then overlays physical nexus exposure in each taxing jurisdiction to quantify the exposure.
Registrations
Properly register clients for the required permits and set filing frequencies that reduce their expenses.
Voluntary Disclosure Agreements
Analyze whether or not a VDA is right for each client. A VDA is warranted if late tax registration would lead to penalties and interest greater than the firm's fees for handling the VDA.
Product Taxability Analysis
Once a client is registered in the right states, they need to comply. The first step in compliance is a product taxability analysis. You must complete this analysis before setting the client up with sales tax compliance software. Without it, you won't be able to configure the software.
Audit Defense
Firms should be ready to defend their clients with a total sales audit. They should also be able to support the Recorded versus Reported taxable sales for each taxing jurisdiction their client is in.
Exempt Transaction Analysis
An exempt transaction analysis lets firms address any normally taxable transactions where no sales tax was collected. Suppose a client is audited and those transactions are left unaddressed. The firm may then have up to 36 month's worth of potential errors to go through, which could have been fixed in the first month.
SKU/Product Analysis
A SKU or product analysis lets accountants make sure their clients’ new products are taxed correctly.
Tax Compliance/Returns
Firms can streamline filing internally by producing a simple file during the consultancy phase. This file lets the practice create tax summaries for each state where their clients need to file.
Recorded vs. Reported Reconciliations
Understand why there’s a difference between recorded and reported transactions. These differences should be accounted for before a SUT return is filed.
Level 3 Data Insights
Level 3 data insights show areas where firms can guide taxpayers to more profits, higher margins, or a less risky business.
Learn more about each of these services and why they’re essential to scaling a profitable SALT practice in this whitepaper produced by LumaTax and Boomer Consulting.
How does a voluntary disclosure agreement work?
A voluntary disclosure agreement (VDA) lets a business come forward about past unpaid tax in exchange for reduced penalties and a limited lookback period. It can suit a client who has had nexus for years without registering.
Through the Multistate Tax Commission’s Multistate Voluntary Disclosure Program, one request can cover several states. 38 states, including the District of Columbia, take part. Key features include:
- Anonymity: The taxpayer’s identity is not disclosed to the state until the VDA is completed.
- Penalty relief: The state partially or completely waives penalties.
- Limited lookback: The state does not assess tax or interest for periods before the lookback period. Each state sets its own lookback period.
- Eligibility: The business must not have filed returns or paid the tax before. It must not be under audit or have had prior contact with the state about the obligation.
The last point matters most for timing. Once a client receives a nexus questionnaire, it may no longer qualify.
How do you start offering SALT services? A step-by-step approach
- Identify clients that sell across state lines, especially online sellers.
- Run a nexus survey to see where each client has physical or economic nexus.
- Quantify the exposure in each state with a nexus exposure analysis.
- Decide, state by state, between direct registration and a VDA.
- Complete a product taxability analysis before setting up compliance software.
- Handle registrations, returns and recorded versus reported reconciliations.
- Keep records ready for audit defense, including exempt transaction support.
Finding an All-In-One Sales and Use Tax Solution
An all-in-one sales and use tax solution helps firms build a SALT practice that meets client needs. Firms need services that make clients more productive and efficient, and that may reduce their tax liability and risk. Offering sales and use tax advisory services checks all of these boxes.
Partnering with LumaTax lets firms build a sales tax advisory practice without investing heavily in staff. They also avoid spending hours collecting client data and researching and applying tax laws from multiple jurisdictions. That's why many well-known and respected CPA firms have already started using LumaTax in their firms. Learn more about Taxually for accounting firms. Firms can also join the Taxually partner program.
How Taxually handles this
Taxually’s LumaTax runs a nexus analysis on your sales, helps you register in the states where you must collect, and prepares and files multi-state sales tax returns, including Canadian GST/HST. LumaTax is currently available to enterprises and accounting firms. For the full workflow, read how to automate US sales tax filing in every state.
Related guides
Frequently asked questions
What is a SALT practice, and why does it matter?
A SALT (State and Local Tax) practice helps businesses manage complex multi-state sales and use tax (SUT) compliance. Since the South Dakota v. Wayfair ruling, more companies are subject to economic nexus rules, making expert advisory essential.
Why should accounting firms build or scale a SALT practice?
Evolving state tax laws and client confusion create strong demand for SUT advisory. Expanding into SALT allows firms to deliver more value while generating steady, recurring revenue from compliance and advisory services.
What services should a SALT practice offer?
Core offerings include nexus surveys and exposure analyses, state tax registrations, voluntary disclosure agreements (VDAs), product taxability reviews, audit defense, and ongoing compliance management.
How can firms make SALT advisory efficient and scalable?
Automation tools can simplify nexus analysis, registration tracking, and compliance reporting—helping firms deliver accurate results faster and increase profitability.
What’s the first step for firms looking to get started?
Begin by assessing client risk through a nexus survey, then build a structured SALT advisory framework using data-driven tools and clear workflows for registration, reporting, and compliance monitoring.
