Saturday, June 25, 2005

Getting Answers - Part 1

Where do you find the answers to your questions; or proof for a customer or vendor who disagrees with your handling of a tax issue; or proof for your boss or co-workers about how to deal with a certain situation? To me, the biggest single challenge for any tax research is the abundance of sources of the law. The need is to be able to consolidate the various laws and interpret them specifically for your situation.

Here's my take on the various resources available to you.

1. Lawyer or accountant - Using a professional is probably the best single resource, particularly if you get the answer from them in writing. Those written responses, which will cost big bucks, will generally be well researched, carefully cited, and customized to your situation. When the auditor asks "Why did you do it this way?", you'll be able to show them the report from your professional. The odds are that the auditor will take a look at it, ask if he can show it to his supervisor, and you'll never hear about it again. That may be money well spent. But the best part of all is that you let the professionals do the legal research. Which if you're not into it, is a pain. I enjoy this kind of thing, but I am admittedly a little out in left field.

Of course, you can't assume that your existing lawyer or accountant is an expert. That is a big assumption. They didn't learn sales and use tax in law school or accounting school. They learned about income taxes of course, but sales and use taxes just never get covered (unless they happened to get an instructor who had lived through a sales tax audit recently). So make sure they're an expert. Here's a previous post about finding such a creature.

2. Associations - This is one of those resources that you probably didn't think about. The state chamber of commerce may have some useful information for you and be able to guide you to someone who can help. Don't bother with local chambers and associations. They're usually more oriented towards boosterism and networking than providing technical information.

Even more useful, if it exists, is a state association (or maybe a national association) for your type of business. Often sales and use tax exceptions are industry specific and your association may be intimately familiar with them since they lobbied for the exemption in the first place or have already fought a court case. They may have publications and seminars available for you as well.

The other benefits to checking out the association are that:

1. It'll save your company money. One woman told me that her association actually has lawyers available that she can consult for free. But even if they're not free, remember that if the association has already figured out the answer, you don't have to spend time and money re-inventing the proverbial wheel.

2. It'll impress your management. I can tell you from my own management days that operational executives in most organizations are frustrated by the lack of interest that the administrative staff has in the business itself. Purchasing, accounting, HR, etc. generally don't go to industry meetings, read the industry magazines, or ask to be on the industry mailing list. If you do all of these things, even if it's only to pick up the occasional SUT pointer, you'll do some serious career enhancement.

More resources in a future post


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