In my first post in this series, I describe the drivers behind the growing need for tax executives in companies of all sizes to establish and advance relationships with state departments of revenue.
As tax leaders begin developing relationships with state departments of revenue—to influence tax policy by providing a corporate business perspective, as well as to add value to their organizations (and careers)—it is useful to keep the following considerations in mind:
Departments of revenue can influence legislators – and legislation. State lawmakers frequently consult with their departments of revenue when drafting tax-related laws and responding to citizen-initiated ballot initiatives concerning tax matters. When new tax legislation emerges, legislators want to know if the department of revenue can administer the requirements of the new law.
There are different ways to exert influence. This point is especially important for tax executives within small to mid-sized companies. A tax or finance leader may meet directly with state tax officials or work through various intermediaries to indirectly share insights and perspectives. Chambers of Commerce and Research Councils often take positions on tax matters, and tax executives can get involved with these organizations. Additionally, non-profit research-based organizations in many states represent corporate taxpayer interests while sharing insights on tax policy with state and local lawmakers. In addition to working with groups like these, tax leaders can join relationship-building efforts spearheaded by tax functions in larger companies.
Small businesses can exert a unique influence. When illustrating the impact of a potential tax policy change on businesses, small to medium-sized (SMB) “Main Street” companies seem to garner the most attention. Policymakers and the public tend to care more about the tax impact on SMB business owners than those of larger, well-known corporations. For this reason, tax leaders in larger companies should solicit involvement from their counterparts in smaller companies. In parallel, SMB tax or finance leaders should ensure that their perspectives are represented – directly or indirectly – to state tax officials.
Tax agencies are aware of compliant and non-compliant companies. As tax leaders develop advisory relationships with department of revenue leaders, they should recognize that their company’s current and past record – how quickly, promptly, and accurately it remits taxes, how it responds to audit requests and more – directly affects relationship dynamics.
Corporate tax departments must be clear about their capability to produce relevant data for emerging legislation. In some cases, tax administrators will have untested impressions of how quickly their corporate counterparts can generate comprehensive, data-supported analyses of various tax legislation scenarios. During initial meetings, it is useful for tax executives to address and temper any unrealistic expectations.
In my next post on this topic, I’ll share five approaches to improve relationships with state tax agencies.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.
Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.
Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.
Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.