Knowledge Center

Tuesday, August 05, 2014

HMB's Jordan Goodman Quoted in Law360 Article

"4 Ways To Avoid Retail State Tax Audits"

Law360, August 04, 2014

By Ama Sarfo

In a cash-strapped economy, state tax authorities are increasing their audits in an effort to get quick cash, and retailers - particularly small and online-based companies - are getting caught in the crosshairs.

Seemingly innocent activities like attending an out-of-state trade fair or driving across a state border in a company-branded car can put retailers under a state's microscope, so they need to be vigilant about their out-of-state activities, says Horwood Marcus & Berk Chtd. state and local tax co-chair Jordan Goodman.

Thanks to the Internet, even mom-and-pop outfits often have national and international reaches, so it's not difficult for a state to prove contact, however minimal, within its jurisdiction.

"You must have your employees in the states where you're willing to be taxed, and if you're going to a trade show, you need to see if they have exemptions like Florida, Nevada and New York where attendance doesn't create nexus in the state," Goodman says.

Meanwhile, some retailers are turned in to state tax authorities by colleagues who are in hot water themselves, according to Goodman.

When state auditors launch an initial inquiry into a retailer's business activities, they send a so-called nexus questionnaire, which can contain as few as 25 and as many as 250 questions. If retailers are worried about their nexus to particular states, they should preemptively answer those questionnaires to have a better idea of their vulnerabilities, attorneys say.

States are largely forthcoming abut the audit issues that are important to them. So if a particular activity is absent from a nexus questionnaire, retailers likely shouldn't worry about it, Goodman says.

Copyright 2014 Portfolio Media, Inc.

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