States of Career Development—Part 3: Actions

Best Practices for Managing and Mitigating Sales Tax Audit Risk

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. My second post identifies several key considerations.

During my previous work as a corporate tax executive, I witnessed the organizational (and career) benefits of cultivating state relationships.

The Key to Maintaining Relationships with Taxpayers

These efforts should be guided by the shared realization that the department of revenue (DOR) counterparts were interested in, and could benefit from, maintaining a trusting relationship with corporate taxpayers. Discussions should take place quarterly and cover a wide range of tax topics, including audit approaches, potential reforms to the appeals board, potential impacts of pending legislations on businesses and state economic activity, and more.

The Best Approaches to Take

The following approaches can serve as a guide to optimizing an ongoing collaboration:

  1. Leverage existing government relations activities and relationships. If your company has a government relations group, consult with those experts first to learn what they know about the DOR’s perspectives, information needs and potential interest in scheduling ongoing meetings. Middle-market and larger enterprises frequently have highly engaged government relations professionals whose focus at the state level covers a range of policy topics – education, transportation, housing and, of course, the taxes needed to fund government expenditures – that relate to state residents’ quality of life. Tax leaders in companies without government relations groups can make similar inquiries to their counterparts at larger companies (that may have relationships with tax officials), the chamber of commerce, or tax-payer advocacy and research organizations.
  2. Operate in a spirit of mutual interests and shared trust: During the first meeting with state tax officials, assert and continually reinforce that mutual interests – namely, sufficient funding for state services and balanced tax policy – underscore all discussions and work together to ensure that both sides operate in a spirit of mutual trust.
  3. Be selective about who participates: Meetings should only be attended by a handful of state officials, including the director and assistant director of the DOR, the head of the department’s audit division and the head of the state’s legislative policy division. On the corporate side, the only people in the room should be tax executives with deep tax expertise — vice presidents of tax, senior directors of tax and/or directors of tax.
  4. Agree on the agenda: Not surprisingly, a meeting agenda serves as a valuable tool. A mutually agreed upon agenda helps corporate tax experts prepare analyses in advance of meetings, keeps meetings focused and gives both sides the opportunity for productive discussions.
  5. Identify issues to consistently address: Over time, it is important to settle on a core set of topics. These “pillars” might include pending legislations, current economic policy/tax objectives and administrative processes such as operational efficiency, audit process, the appeals process and rulings.

Marketplace Facilitator Adjustments

As state legislatures begin reconvening in the months ahead, they will continue to adjust tax rules and laws for marketplace facilitators in the wake of the Wayfair decision. State legislators also will need to start evaluating a range of difficult fiscal decisions made necessary by the double impact of pandemic-related cost increases and revenue declines.

Companies of all sizes will benefit by proactively shaping policy decisions through their mutually beneficial relationships with state tax agencies. Tax leaders who rise to this challenge will realize benefits to their companies, as well as enhance their expertise in tax policy, a critical step in becoming a more effective trusted tax professional.

Explore the Series

States of Career Development—Part 1: The Opportunity
States of Career Development—Part 2: Key Considerations

Blog Author

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Vice President of Tax Content and Chief Tax Officer

See All Resources by Michael

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.

View Newsletter Signup

Article: The Art of the State Relationship

Our Chief Tax Officer Michael J. Bernard discusses the mutually beneficial advisory relationships between state tax agencies and corporate tax leaders.

Legal court building.