Let’s Talk About Tax

It is another brisk morning walk to work. Leaves swirl about and black coffee warms your body as the autumn wind blows. Once inside, you take the elevator all the way up before walking down the hall to your office. You just closed the quarterly books, so your morning is busy preparing to report financials. Despite the chaos, you are calm and in control. You then open an email from your general counsel, and all calm is shattered.

The two most troubling sales tax issues for companies tend to be related to software and direct mail. Direct mail is especially difficult, as there are numerous issues to untangle, and a robust understanding of the facts is critical.

Having spent more than a decade working with taxpayers and Department employees on sales and use tax audits and refund requests, I find that responding to documentation requests from the Department can either be an exercise in pragmatism or an exercise in preventing auditors from murdering a taxpayer’s business by a thousand cuts. The reality is that accumulating and providing documentation is easier for some taxpayers than for others. Similarly, the requirements laid out by some states, or by some auditors, are more burdensome than by others.

As I ask organizations, big and small, what sales and use tax issues cause them the biggest headaches, the answers are overwhelmingly the same – taxability and apportionment of both software and direct mail. I’m going to save direct mail for another day. But for those who are unconcerned about your organization’s treatment of software, I’m here today to read you the riot act.

The story can apply directly to issues currently facing Minnesota taxpayers. Said directly, we will have “unpredictable elements” in life. And, while those elements can be insurmountable when surfacing on their own schedule, we can have a positive impact when exercising deliberate foresight.

The process that organizations go through during the preparation, deal, and integration phases of an M&A transaction are fraught with tax issues. Learn how Fredrikson & Byron can help.