Background 

A client preparing to sell their business was advised by a Big Four firm representing the buyer that they faced more than $3 million in local tax liabilities across operations in more than 16 states. Concerned about this assessment, the client engaged MGO’s State and Local Tax (SALT) team to conduct a second review of the due diligence performed by the Big Four firm. 

Challenge 

The initial assessment by the Big Four firm indicated significant tax liabilities that threatened to complicate the sale. The client needed a thorough review to verify the accuracy of these claims and explore potential avenues for reducing the liabilities for both past years and on a prospective basis. 

Approach   

The MGO team conducted a comprehensive deep dive into the state sales and income tax filings, uncovering inconsistencies in the original due diligence assessment. MGO found the client did not have the requisite nexus in several states as claimed by the Big Four firm. Additionally, our SALT team identified tax exemptions, secured resale certificates, and made corrections to transactions for the client’s customers. We provided an extensive workbook that meticulously tracked the resulting tax reductions for each customer transaction over a four-year period. 

Value to Client   

Despite significant pushback from the Big Four firm and its extensive team, MGO successfully defended its technical positions and resulting tax calculations. Our thorough review and strategic approaches significantly mitigated and reduced the client’s estimated tax liability by 90% — from the original estimate of more than $3 million to approximately $300,000. 

Need knowledgeable and experienced tax guidance to help you navigate complex multi-state tax issues? Reach out to our SALT team today.