Assuming the Marketplace Fairness Act is enacted, many companies may find themselves required to register and collect sales taxes in states where they have little tax experience, Michael Miller of Merit Advisors, L.P., cautions in this week's issue of Bloomberg BNA's Weekly State Tax Report.
However, this risk can be mitigated through careful planning, he writes. One way to do this is to foster internal communications in a corporate culture that strives for preparedness, according to Miller.
A business should ensure that all departments within the company support the tax department in a timely fashion when records are required, Miller writes. Often a few thousand dollars of IT support can avoid hundreds of thousands of dollars in tax liability. The tax department, information technology, systems, consultants, accounts payable, inventory, project managers, and the sales department, all must be conversant with one another to mitigate risk, he explains. Lack of communication among departments can result in expensive and time-consuming tax problems.
The sales department and project managers in particular should be encouraged and allowed to communicate with the tax professionals and vice versa, according to Miller. Routine and well-attended internal presentations, newsletters, and meetings can go a long way in helping the company manage risk by keeping everyone informed of potential issues and when questions should be raised, Miller says.
Auditors, even in the current "pre-fairness" world, often will seek to communicate anonymously with sales and project managers to get ammunition for use against a company in a future audit, Miller explains. Poorly constructed responses to auditor inquiries by uninformed personnel can result in tax liability or at least a more expensive audit defense process, so foster internal communication, Miller cautions.
Check out other recommendations by Miller on how to plan for "Marketplace/Mainstreet" fairness here.
In other developments…
The Multistate Tax Commission issues its Winter 2013 edition of the Multistate Tax Commission Review
Tax Watch, Summer 2013 edition , by the Tax Foundation
Federal Legislation - Business Activity Tax Simplification Act of 2013 introduced , a new alert by PwC
Exempting taxable services from Texas sales and use taxes under the multi-state benefit test , by the Texas State and Local Tax Law Blog
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