Berdon Blogs

SALT TALK: Sticks, Stones and Why Did the Accountant Cross the Road?

Written by Wayne Berkowitz CPA, J.D., LL.M. | Sep 18, 2017 3:40:00 PM

Because that's what she did last year. Yes lawyers, accountants get insulted too, and the worst insult that can ever be hurled at us is to be called a business historian. Or at least that's what I used to think. Cutting edge ideas are great. But who is going to help you decide when you've gone over the edge? That's right, it's us.

Based on my historical observations, tax cases often end up in court for one of two reasons: Either someone had a cutting edge idea the taxing authorities didn't like, or someone took a bleeding edge position (knowingly or not) and is now backed into a corner. Sometimes the taxpayer is lucky enough to get out of the corner, but as most lawyers know (I'm one as well so I get twice the insults), bad facts make bad law, sometimes overturned on appeal, but always making headlines (not of the NY Times variety but more along the lines of State Tax Notes).

Can you guess what happens next? I hear the phone ringing and the voice on the other end asking why can't I or why didn’t I do that? While my federal tax brethren may think they have it rough, multiply this by 50 states, an infinite number of localities, and the accelerated speed at which state and local tax is evolving and it is clear that state and local tax issues are becoming increasingly more complex.

Sales tax nexus comes immediately to mind. As states are battling in cyberspace to maintain their share of revenue, extreme cases and legislation are developing every day.  What about personal income tax residency and income sourcing issues? Once again, the ability to work and live almost anywhere is accelerating the pace of challenging cases. Let’s not forget employee vs. independent contractor concerns.  Not only are these concerns going to generate the traditional withholding issues, but that former valuable “employee” now working from home may also generate additional business tax obligations.

There are many approaches to making these decisions and every client is different. The common thread is that they all involve being up to date on the latest “bleeding edge” decisions. Only then can you sit with your business historian and evaluate the right and most cost effective position for you and your business.

Should you have questions about a state sales tax position, contact me at wberkowitz@berdonllp.com or your Berdon advisor so we can help you develop the right position for you and your business.

Wayne K. Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.