Every client that I assist with sales tax issues has another accounting professional they use for reporting and tax. In most cases, these professionals are well staffed CPA firms with a wide range of tax and accounting capabilities. When I start interviewing the client they tell me that since their CPA firm has never expressed any interest in assisting them with sales tax, they just assumed that they either didn’t do that type of work or didn’t think the company had any needs in that area. That’s music to my ears and I certainly appreciate the opportunity to work with your clients.
Over the past 20 years of talking with clients and with the CPAs, several common threads have emerged that shed light on the relationship that many companies have with their CPA or accounting professionals. I want to mention and discuss three things I’ve learned about clients and their CPAs. http://www.salestaxstrategies.com/firm-overview/
1. Clients generally contact their CPA about sales tax only when there is a problem.
When it comes to communication between a client and their CPA about sales tax, the phrase “no new is good news” seems to be appropriate. Months or years can go by with little conversation about sales tax, then, out of the blue, comes an audit, a notice, a nexus questionnaire, a major customer complaint, or an offer to buy the business, and then sales tax can to be a crisis (in some cases it really is a crisis!). Dealing with sales tax in a pressure situation such as an audit or M&A deal is not the best way to handle these things. In most cases, there is a short time span in which to respond, people are focused on many other issues, and information critical to managing the situation may be hard to find. When I get called in situations like this, I feel a bit like the bomb disposal guy who gets handed something with a short fuse that is ticking loudly. The first goal is to see what type of bomb it is and then determine how best to defuse it.
In many situations, this type of communication strategy may be what the client and their CPA have planned. For clients that operate in a single state this may be the appropriate strategy. However, for companies that operate in a multistate manner this strategy may lead to exposures and liabilities that could have been avoided had there been a more regular line of communications. With the changing nexus and taxability rules CPAs should have some regular line of communication with the clients. Further, clients must also be a bit more proactive in communicating with their CPAs about changes in business practices that might have tax consequences. This would include adding new offices, changing the way products and services are sold, changes in customer types, and the use of third-party relationships to help the business.
In most cases, sales tax problems can be eliminated or minimized if identified and addressed as early as possible. Don’t wait until there is a crisis to be in communications with your CPA. If you don’t believe your CPA can handle these questions, please contact me at email@example.com
2. Clients search the Internet to get answers to their sales tax questions.
The Internet is a wonderful and powerful tool for individuals and businesses to use to get and share information. There is no shortage of accurate and questionable information on just about every topic; including sales tax. I’ve spent my share of time putting sales tax information on the web through my blog, website, and guest blogging on other sites. I try to be as careful as possible with the information I post but even I’ve made a mistake a time or two. In talking with many companies, a common phrases I hear goes like this, “I’ve spent the past two weeks searching the web for sales tax information and am very confused”. Worse yet, they will say, “I found a website or blog that said that sales tax is not anything I have to worry about, but wanted to check to be sure”.
When it comes to sales tax, the Internet is full of valid and invalid information. There is no professional certification required before you can post a message or blog to any website and there is no alarm that alerts users to what information is valid and invalid. Further, because sales tax is factually sensitive, applying Internet results based on general search terms to situations that are very fact specific, the results may be misleading or disastrous.
If you, as a CPA, are not perceived as a capable and approachable resource for your clients to contact about sales tax questions, then your clients may be getting technical help from Internet “experts”. However, when something goes wrong, it will be your mess to help them clean up.
3. Clients are calling Departments of Revenue to get help.
I routinely get calls from companies that start with the phrase “I called the _______ Department of Revenue and they said I should be charging tax on _______”. My shock at these statements is that the company was expecting the Department of Revenue to be their tax consultant and to provide them with accurate and company specific information. Rarely does this happen. While Departments of Revenue do their best to provide good information, their job is mostly to collect and process as much tax revenue as possible. They are not tax consultants and there is no assurance that the person who provided the information has any real expertise at all. If you or your clients use Department of Revenue websites or call centers as your primary source of multistate sales tax information, I would caution you that this might be a dangerous practice to continue.
This blog is directed to CPAs and to companies looking for sales tax advice. The points are equally valid. If you are a company with a CPA or other tax advisor, you need to have an open and systematic dialog with them to increase the chance that they will provide you with the most accurate information. Don’t rely on the Internet for solid advice. Sales tax is fact sensitive and the answers are often complex and will vary by state.
If you are a CPA, you need to know that your clients are seeking information from any and all sources that they can. This may be include qualified and unqualified Internet sites, state departments of revenue, and other sources that don’t include you. However, if something goes wrong you may be the first person they call and you may be quickly blamed for their problems.
I work with CPAs to help them assist their clients. My practice allows CPAs to provide top quality sales tax consulting services to companies without having any investment in resources. Please contact me at your convenience if you have client questions or are just looking for a resource for sales and use tax advisory services. Please check out www.salestaxstrategies.com
Ned A. Lenhart, CPA