Surprise! Surprise! Surprise! - The State Auditor Looked at Your Website???

Rusty Little

While this entry is more of a random musing than a highly technical analysis, it addresses a common issue faced by many taxpayers.

Many times taxpayers have a "Gomer Pyle moment" when a state tax auditor refers to a company's website to corroborate something they have been told or to support their position.  This happens most frequently with potential nexus questions and when an auditor is trying to determine exactly what activities a company may be performing in the state.  Any state tax auditor worth his or her "salt" (pun intended), is going to review a company's website to gather intelligence.  This is going to happen both in the world of on-site audits and also in the world of desk audits/nexus questionnaires.

When you answer nexus questionnaires and/or reply to IDRs, be sure to check your answers against what the company is telling the world on its website.  Company websites often tend to "over sell" because they are a marketing vehicle by design.  But if the company website says something like "we will install or service our widgets for you no matter where you live" or "our sales representatives are also available to train your employees," then you might have some explaining to do.

The mining of company websites by state tax auditors for information is nothing new and is not just limited to questions of nexus either.  Information pertaining to sourcing of sales, intercompany transactions, arm's length relationships, and many other issues can be gleaned from a simple review of a company website.

Any tax professional worth his salt should be very familiar with what a company is telling the world on their website long before a state auditor or nexus questionnaire ever arrives.  Company websites are a rich source of information for states looking for low hanging fruit (potential audits) and also for auditors who are currently working on company income tax, sales tax, and/or abandoned property audits.

It is prudent to try to avoid those Gomer Pyle moments . . .

How to Fight Back Against State Tax Audit Assessments: Developing an Advantageous Relationship with Your Auditor

To many taxpayers, the average audit is a nuisance—and the temptation to simply settle and move on is very strong. In an earlier article, Geoffrey J. Christian, of Dow Lohnes Price Tax Consulting LLC, laid out a case for the long-term benefits that arise when a taxpayer pushes back against audit assessments. In this article, Marshal Kline of Dow Lohnes Price, discusses one of the most effective tools available to any tax professional—creating a good rapport with the auditor.


In our present environment, where state tax audits in all areas of taxation are on the rise, many tax professionals find themselves spending more and more time being reactive than proactive. Fewer are the days tax professionals go to work and actually find themselves devoting their time to the things they intended. Instead, they are being pulled in a variety of directions, scheduling field audits, responding to information document requests (IDRs), reviewing notices of deficiency along with the related workpapers and analyses, drafting protests in response to same, and, when there is time, preparing the tax returns that begin the whole process anew.


To continue reading entire article, click here .


Reprinted with permission from BNA Tax Management Weekly State Tax Report.  Authored by Marshal Kline, Dow Lohnes Price Tax Consulting Group, and published by BNA Tax Management Weekly State Tax Report on May 28, 2010.

Are Your State Audits Ridiculous? It's Time to Push Back!

It's important to stand firm against aggressive state auditors who attack your tax reporting positions. This article examines how you can successfully navigate through an arbitrary or unreasonable assessment and use the "push back" approach to gain favorable results in the audit battle.


Please click here to view the full article.  Reprinted with permission from BNA Tax Management Weekly State Tax Report.


Authored by Geoffrey J. Christian, Dow Lohnes Price Tax Consulting Group and published by BNA Tax Management Weekly State Tax Report on January 22, 2010.