Quick take
A company can create state tax exposure long before management recognizes it.
Glossary term
SALT (State and Local Tax)
SALT stands for state and local tax and refers to the state-level and local tax obligations a company may owe where it has nexus. In M&A, SALT diligence focuses on whether historical payroll, sales, property, or operational activity created filing or payment exposure in jurisdictions management did not fully address.
Why it matters
SALT exposure is a common source of unrecorded liability, especially for companies with multi-state operations or remote employees.
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Reviewed by Sorai’s diligence research and workflow design team.
Financial, tax, legal, and transaction process terminology for investor-facing diligence workflows.
Key points
- Covers income, franchise, sales, use, and other state-level obligations.
- Turns on nexus, which may arise from employees, sales, property, or operations.
- Can create historical filing gaps and reserve issues.
- Matters in both pre-LOI screening and full tax diligence.
- Often intersects with transaction structure and post-close remediation planning.
Related terms
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Frequently asked questions
What does SALT mean in due diligence?
It means state and local tax, including the filing and payment obligations a target may owe where it has nexus.
Why is SALT a common diligence issue?
Because multi-state operations, remote employees, and sales footprints can create exposure that management has not fully reserved or filed for.
Is SALT only an issue for large companies?
No. Mid-market and fast-growing companies often create SALT exposure as soon as their footprint expands across states.