13 Books You Should Read & Saturday Musings (INNOVATION)

Good morning. It's Saturday. I have multiple 'land chores' on the schedule for today. If you don't know, we bought 16 acres near Nashville last year. Totally gutted the house and completed a 6 month renovation last December. It's awesome having no one around us. First time I have lived in the country. The only challenge is the land. Getting it and keeping it the way you want it. 12 acres are trees, so I have approximately 4 acres or so of mowing, weed killing, tree cutting, etc., etc., etc. 

In any case, back to state taxes.

If you have noticed, over the past couple of weeks I have started to curate state tax AND business developments into the LEVERAGE SALT LinkedIn group. I think this is a good way to put multiple pieces of important information into one place. I hope you are liking the format. 

In regards to my practice, I am constantly looking for new ways, new services, changing my website, changing my marketing, contacting new people, developing new relationships - trying to change the state tax world for the better. I don't want to just do what everyone else is doing. I want to create and innovate. Do something new. Develop a new angle. A fresh approach. A better way.

Contact me with your ideas. Your passions.

How would you change the state tax profession?

How can you better serve your clients?

What does your tax department really need from your state tax consultant and why aren't you getting it?

I am a state tax partner and writer. In addition to the 40+ articles with my name on it, I have ghost-written several articles for firms. Let me know if you are interested in learning more to help your firm grow its practice.

Some of my favorite books I have read are:

1. Tribes by Seth Godin
2. 10X Rule by Grant Cardone
3. Be Obsessed or Be Average by Grant Cardone
4. Essentialism by Greg McKeown
5. One Thing by Gary Keller
6. Crush IT! by Gary Vaynerchuk
7. Start with Why by Simon Sinek
8. REWORK by Jason Fried
9. The Compound Effect by Darren Hardy
10. Make Ideas Happen by Scott Belsky
11. Deep Work by Cal Newport
12. So Good They Can't Ignore You by Cal Newport
13. The Freaks Shall Inherit the Earth by Chris Brogan 

Have a great weekend!

Tax Legislation: Are We Asking The Right Questions?

State tax developments are everywhere. They happen daily. The question is - are we just reporting them or are we challenging them?

This legislative season has seen crazy proposals to raise revenue, balance budgets - all influenced by political pressures and confusion. We have policy organizations submitting reports and studies asserting that certain proposals are ridiculous or would either be unfair or detrimental to the state and specific taxpayers. This complexity not only applies to state tax legislatures, but also the federal government - as we know. The problem is that states generally have to balance their budgets every year to operate (although apparently that doesn't apply to Illinois).

One thing I noticed is that state legislative sessions are focused on raising revenue. Always asking what can or should be taxed? What new forms of business do we need to tax? What tax revenue are we missing out on?

I think those are the wrong questions. The questions we should be asking are:

• What services should the state or federal government provide?
• To what extent ($$) should the government provide those services?
• How do we prioritize those services?
• What is the cost/benefit of providing those services?
• At what point does the provision of those services cause detriment to citizens and our economy? 
• What oversight will each service have to avoid waste and efficient use of taxpayer dollars?

We don't always need more revenue. We need to rethink and revamp the purpose of government. Our governments should be lean and efficient. They should provide us with what we need most - not more or less. It's not about tax revenue, it's about efficient government. It's about the health and wealth of our country - financially, physically and spiritually. 

If we never ask the right questions, we won't get the right answers.

DON'T BE A ROBOT. PROVIDE LEVERAGE.

With all the talk of innovation, robotics and artificial intelligence changing the landscape of how tax departments function, it is imperative that tax professionals position themselves as something more than data movers.

Certain areas of accounting and tax have been commodities for years. Now, with technology, it will become even more so. As I have been saying for years, the real value of a tax consultant is providing leverage - knowledge, judgment and advocacy. In other words, it isn't the data that helps a company win an audit, determine a position on a return, or plan to minimize tax on a merger or acquisition. It is the knowledge, judgment and advocacy (expertise) of the tax professional and his or her ability to interpret and apply the law to specific data. The experience and connections of a tax professional cannot be mimicked by a computer or robot.

Position yourself to be valuable. Position yourself to provide leverage.

That's my objective.

Why Corporations Don't File State Tax Private Letter Rulings

• Taxpayers must disclose their identify before obtaining an answer from the state.
• Facts may not be accurate, or disputed later, making the answer invalid.
• Ruling may be revoked at any time.
• Timing of the proposed and prospective transaction with obtaining an answer from the state.
• Rulings are binding unless the facts are not accurate.
• Unsure as to how deep of an analysis of the law the corporation is required to provide.
• The length of time to obtain a ruling.

Why would you request a private letter ruling?

• To avoid receiving an assessment for additional tax, interest and penalties in the future

How do you file a private letter ruling?

• get your facts straight
• do it timely

Any questions?

Middle Market Companies Fight State Tax Surprises

As a CFO, controller or finance executive in a middle market company, you have a wide range of responsibilities to manage.  State and local tax matters can pop up when you least expect it and cause compliance and financial burdens.

Some of those state tax surprises could be (regardless of industry):

1. State tax registration requirements - when should you register?  If you register, will that create tax filing obligations?  When can you withdraw your registration?
2. State income tax apportionment - when can your company allocate income instead of apportion income?
3. Sales taxability of digital goods, licenses, subscriptions, computer hardware, software, cloud computing, etc.
4. Sales tax audits and appeals
5. Choosing sales tax codes for your sales and purchases to correctly utilize your sales tax compliance/decision software with your ERP system
6. Knowing when your company has a filing obligation in a state
7. Filing Voluntary Disclosure Agreements to mitigate prior year tax exposure
8. Determining sales tax consequences of "bundled transactions" or "mixed transactions" (transactions that include taxable items with non-taxable items)
9. Determining sales and use tax consequences for entities that conduct transactions with governmental entities.  When does the exemption apply?  What does the exemption apply to? 
10. If my company is a service provider, is my company paying use tax on purchases?

Several of my clients have had these issues recently.  Do any of the above items sound familiar to you?  

Current State Tax Amnesty Programs

In case you missed what states have amnesty programs going on currently, I thought I would send you a link to COST's (Council on State Taxation) quick summary.

Amnesty can be a great tool for states and taxpayers, but sometimes a voluntary disclosure agreement is a better option.

What is an Amnesty Program?

An amnesty program is generally a time period established by a state to allow taxpayers who are delinquent on their taxes to come forward, and pay those taxes without penalties being imposed. Usually interest is still imposed, but sometimes it may be waived as well. Each state amnesty program is different or unique; meaning, they each contain their own set of rules, guidelines and qualifications. Amnesty programs usually pertain to certain tax periods, specific tax types, and taxpayers who meet certain criteria. In other words, "look before you leap."

Taxpayers who are eligible for an amnesty program, but don’t take advantage of the program, are often faced with harsh penalties if caught after the program has ended.

Voluntary Disclosure Agreements

When amnesty programs are not in effect, most states still have what they call “Voluntary Disclosure Agreement” (VDA) programs which allow taxpayers to come forward on an anonymous basis, limit the number of prior years required to be filed (usually 4), and pay taxes and interest. Under most VDA programs, penalties are waived, but not interest.

Remember, a voluntary disclosure agreement is only able to be utilized if the state has not already contacted the taxpayer (in most cases). If the state contacts the taxpayer first, technically, the state can make the taxpayer file returns for all previous years in which the company had nexus in the state. However, generally, the state does not require returns to be filed for all previous years. The number of years a state will require depends on the facts of each case. In addition, unlike a voluntary disclosure, there is no relief for interest and penalties.