Deep Work

Are Remote Retailers and Marketplace Providers in the 'Path of Totality'?

Well, it's the day - solar eclipse day. A once in a lifetime event. Are you ready? Do you have your glasses? Will you see the total eclipse or partial eclipse?

According to the Washington Post, "the path of totality — the 70-mile-wide strip of America from Oregon to South Carolina in which the moon will, for a couple of minutes, block the sun — crosses the homes of an estimated 11 million people."

A total eclipse is something that happens once in a lifetime (if you are lucky; every 400 years or so). Well, today, our modern economy is converging with past sales tax law creating a sales tax 'eclipse' and is having difficulty figuring out how to look at it. We need the 'right glasses' to be able to tax remote retailers (online sellers) and marketplace platform providers. Amazon, since it is the largest marketplace provider I am aware of, has become the creator of this convergence, or sales tax 'eclipse.' 

We - state and federal governments, departments of revenue, taxpayers and tax professionals - must accept the fact that this sales tax 'eclipse' is happening. We must also work together to find the 'right glasses' or we will cause damage to our 'eyes' (economy and state revenue). 

Currently, states have imposed economic nexus standards and use tax notice and reporting requirements ALL with the intent to skirt the physical presence standard established by the Quill court case. The physical presence standard requires a retailer to have a physical presence standard in the state before the state can require the retailer to collect sales tax. 

I am all for states figuring out the best way to tax these remote retailer transactions; or first determining if they should tax it. I get that the states need revenue. What I disagree with is how states are going about trying to make it happen. Adopting economic nexus laws that fly in the face of Quill to simply get companies to challenge the economic nexus law is ridiculous. States want taxpayers to either comply or challenge the law, hoping the U.S. Supreme Court will take the case and overturn Quill

The use tax notice and reporting requirements are more burdensome and complicated than simply collecting and remitting sales tax. Again, another indirect way that states are simply trying to get companies to collect sales tax. If you can't change the law, create a law that is more complicated so companies choose the less burdensome road. I get it, but I disagree with it.

Companies want certainty. Companies don't want to focus on sales tax, they want to focus on their business. They want taxes to get out of the way or at least be something easy and clear to comply with. Companies don't want to get caught not complying and have to pay additional taxes, interest and penalties. The problem is, states are trying to force new tax collecting obligations without working together with businesses and tax professionals. They are forcing it, which is producing uncertainty and more confusion. 

State taxes already present a maze of taxing jurisdictions all competing for business and revenue with non-uniform tax laws. With this sales tax 'eclipse' staring us down, all I ask is that we work together to find the 'right glasses.' I ask the states to stop forcing damage to our eyes.

PROVIDE REAL VALUE. NOT NOISE.

If you've been paying attention, which I'm sure you have, I am constantly changing my website and thinking of ways to market, re-market, re-package or change the way I present my services and myself. This is the life of a solo state tax consultant. I am always thinking. Always learning. AND I can implement changes whenever I want - maybe sometimes hastily, but I would rather be innovative and try things, then to be stuck in the trap of 'that's the way we have always done it,' or changes take time to get approved by layers of bureaucracy and by the time they get approved all momentum and enthusiasm about the change is long gone.

Life is too short to be the same as everybody else, and that is exactly what we have in the public accounting and law firm world. Everybody is the same. The same boring websites. The same descriptions. The same strategic visions. The same services. The same message. The same hot topics. Every firm is trying to be the first to write about a hot topic, or the first to go in-depth about a topic. I should know. I spend my days daily reviewing state tax developments and writing about them. I also conduct research for clients and attempt to provide insight and actionable, innovative, intelligence (I just made that term up, you can feel free to use it). 

There is so much 'noise' in the world. So much knowledge and information being spewed on the internet and social media, while you are just trying to do your job. The question is - what do you need to know to do your job? How can you best help your company or your client? Are you going deep enough into the details of the law, cases, etc. to find true value? Or are you just scratching the surface, going from meeting to meeting, running around with your head cut-off, waiting for lightning to strike? 

Life is too short to be boring. Too short to not take the risk to be creative. 

BE AUTHENTIC. BE REAL. DON'T TRY TO BE SOMETHING YOUR NOT.

What is your firm good at? What are you good at? How can you be different? How ARE you different? 

Be different. Be creative. Provide REAL VALUE, NOT NOISE.

I HATE STATE TAXES AND WHY YOU SHOULD TO

I am a state tax consultant and I hate state taxes. Why? Because state taxes are a burden to every company doing business. The registration to do business, the business licenses, the sales AND use tax, franchise taxes, income taxes, property taxes (personal and real property), local income or gross receipts taxes, etc.

Companies are in business to make money and use it to grow their business, not pay the government. I am not a state tax consultant because I love the complexity of state taxes and the fact that it changes daily. I am a state tax consultant because companies need help navigating the complexity of state taxation or they can end up in some big financial trouble that impacts cash flow. 

Now, your Fortune 500 companies may not care as much - meaning, their federal tax liability is usually relatively much larger than their state tax liability, so state taxes usually take a back-seat. However, your growing middle market companies and smaller companies must pay attention or face material liabilities that impact their ability to do business. 

The problem for a state tax consultant is that the correlation between the size of a company and importance of state taxation, is sometimes in contrast to how much a state tax consultant can charge for his or her work. Fortune 500 companies can afford to pay more for state tax consulting services and usually the project or issue has more zeros behind the dollar amount involved. So it makes sense that the fee is larger. 

For middle market companies and smaller companies, even though the dollar amount at issue may not be as large as it is for a Fortune 500 company, the issue is just as valuable or more so because of the relative effect it could have on the cash flow of the company. 

As a result, state tax consultants often have a hard time deciding which type or size of companies they should focus their services on. Each group (large and small) have a need with different means to pay or priorities. 

Regardless of size, companies are not in business to pay taxes. CFOs, Controllers and privately held company business owners are not in business to learn and study state taxes. They don't want to know the technical complexities, they just want solutions. They want to do business with as little tax burden as possible (in dollar amount and compliance). Our job as a state tax consultant is not to explain the technical difficulties and show how smart we are. Our objective should be to resolve state tax issues in practical and cost-effective ways, with as little technical jargon and difficulty as possible. If the client wants to know more, provide it. But otherwise, just do it without explaining the technical theories and potential 'greyness' of the issues involved. Clients don't want to know how difficult it is, they want to know you are on top of it and can resolve it with as little pain as possible.

As a state tax professional, don't fall so in love with the complexity of state taxation that you forget why you are studying it in the first place. That's why I like to keep my perception as one that hates state taxes, because every business does. This ensures that we are on the same page.

ONE-STOP SHOP FOR FREE STATE TAX RESOURCES

I have put together a web page of sites that offer FREE updates on state tax developments. I have also included some of my favorite business and practice management sites, magazines and blogs. 

Please take a look - ONE-STOP SHOP.

Please let me know which sites you find most useful and if you have a site I should add. 

Thank you and enjoy.

DO 'DEEP WORK' AND GET RESULTS

Are you doing 'deep work'? 

Meaning, are you digging into the facts and state tax authority to find what is essential? To find true cash tax savings? To identify, quantify and mitigate risk?

We are all bombarded with the 'fire drill' of the day - compliance or reactive, last-minute advice needed for a transaction. Perhaps a notice or audit assessment out of the blue with a tight deadline. Some of us respond to e-mail constantly.

It's time to do deep work.

To do the projects that others don’t want to do or have time to do. To dig into court cases, rulings, statutes, regulations, audit assessments, transactions, etc. to identify opportunities, risks and tax policy that should be challenged.

To work with tax professionals, and legislators to learn their perspective and shed light on areas that are grey.

To help reduce the unintended consequences of legislation and problems caused by actions taken or the lack thereof.

After we do deep work, we need to turn that ‘deep work’ into intelligence and tools that are practical. To communicate the application of complicated state tax authority into easy to understand terminology which allows clients to make informed decisions and act.

It is too easy to be reactive in life and at work. I seek to live and work proactively, and lead my clients to do so as well. I believe extraordinary efforts are directly determined by how narrow you can make your focus. I also believe in every set of facts or law, something essential is hidden.

I don't just want to be the best at what I do. I want to find the best way to do it.

State tax professionals solve problems through technical arguments, experience, negotiation and contacts. My role is to make it easier.

State taxes are deceptively simple and endlessly complicated. Let's do deep work and get results.

STATE TAX REQUIRES 'DEEP WORK'

DEEP WORK: Professional activities performed in a state of distraction-free concentration that push your cognitive capabilities to the limit. These efforts create new value, improve your skill, and are hard to replicate. - definition by Cal Newport

I started reading "Deep Work: Rules for Focused Success in a Distracted World" by Cal Newport last night. I am only in about 60 pages, but so, so good. I highly recommend all knowledge workers to read this book, especially accounting and law firms that have adopted the open office concept, instant messaging and collaborative meetings upon collaborative meetings.

Cal first emphasizes the value of Deep Work or batching work in blocks of time to allow yourself to really go deep and focus. Stop checking e-mail, instant messaging, etc. Our brains are easily distracted. We will also feel like we are busy and doing valuable work by simply responding to messages, e-mails all day and going from meeting to meeting, but did you really do anything valuable? With that said, Cal does caveat this with the fact that some management roles require quick connectivity and rely on others to do the deep work and come to them with conclusions. High level execs may produce value by being connected and not being isolated or disconnected to do deep work. 

For those who are not high-level execs, deep work is required and a necessity. Cal mentions in the book that "as knowledge work makes more complex demands of the labor force, it becomes harder to measure the value of an individual's efforts." So true. Why do you think accounting and law firms have timesheets? Why do we have performance reviews that seem like a waste of time? This supports Cal's thesis that we need to do deep work. Deep work produces value.

He mentions that we all follow the principle of least resistance. This is why, even if we agree with Cal, we will default into the 'fragmented' attention, as he calls it, simply because of the workplace culture we are in. In other words, we won't change unless our culture allows or supports us to change.

Accounting firms and law firms (and corporate tax departments) rely on their associates to do complex work, yet expect that to get done while listening to other people talk on the phone, conduct conversations a few feet away or while having a meeting every hour. 

We need to get back to doing deep work, focused work. We need to block out time. Our clients and companies deserve the best we have to offer, and we owe it to ourselves.

The above was some random reflections from reading the first 60 pages. More to come. Let me know what you think and if you have read the book.