Ohio Tax Advanced: Leveraging Technology & Data to Improve Tax - PDF document

27th Annual Tuesday & Wednesday, January 23‐24, 2018 Hya� Regency Columbus, Columbus, Ohio Workshop L Ohio Tax Advanced: Leveraging Technology & Data to Improve Tax Compliance, Audit Defense & Produce Significant Tax Savings Tuesday, January 23, 2018 3:00 p.m. to 4:00 p.m.

Biographical Information Kyle O. Sollie, Partner, Reed Smith LLP Three Logan Square, Suite 3100, 1717 Arch Street, Philadelphia, PA 19103 ksollie@reedsmith.com 215 851 8852 Kyle and his colleagues in Reed Smith's offices throughout the country use the right tools at the right time to help their clients pay no more state tax than legally due. Kyle's practice includes state tax return positions, audits, appeals, and litigation, focusing on Pennsylvania, New Jersey, Delaware, and California. Kyle is active with the Institute for Professionals in Taxation. He is a Certified Member of the Institute (CMI) for sales tax. To make sure Reed Smith’s clients get the best results and understand the policies and practices of the agencies, Kyle and his colleagues have successfully obtained thousands of unpublished policy documents through state-law FOIA claims in Delaware, Pennsylvania, New Jersey, and California. Access to Reed Smith’s “library” of documents through a Reed Smith lawyer is an essential advantage of being a Reed Smith client. Kyle usually gets results for his clients through the administrative process. But when litigation is necessary, he fights for his clients in court. He has brought scores of cases in courts in New Jersey, Pennsylvania, Delaware, and California. His published cases include Nextel Communications of the Mid-Atlantic, Inc. v. Commonwealth, 98 F.R. 2012 (2015), Toyota Motor Credit Corp. v. Director, N.J. Tax Court No. 002021-2010 (2014), McNeil-PPC, Inc. v. Commonwealth, 834 A.2d 515; First Union National Bank v. Commonwealth, 867 A.2d 711 affirmed, 901 A.2d 981; and Dial Corp. v. Delaware Director of Revenue, C.A. No. 06C-05-014 (Del. Super. 2008). Fred R. DiIorio, Senior Tax Counsel, General Motors Co. LLC 300 Renaissance Center, MC: 482-C16-B16, Detroit, MI 48265-3000 fred.r.diiorio@gm.com 313 665 4053 Fred currently is Sr. Tax Counsel for U.S. Indirect Taxes. He has over 36 years in state and local taxation with LTV Steel Company and GM managing state and local tax compliance, audits, appeals, legislation and planning for multibillion dollar companies. He has managed various large state and local litigation throughout the U.S, including one heard by the U.S. Supreme Court. He currently is responsible for GM’s U.S. transaction tax audits, appeals and controversy. Fred is a former chairman of the Indiana Manufacturers Association’s Tax Committee and regularly participates in state and local tax associations across the country. He occasionally speaks at various tax groups. He earned a B.S in Accounting from Robert Morris College, Master in Accounting and Financial Information Systems (MAFIS) from Cleveland State University, Master in Science in Taxation from Walsh College and a J.D. from Western Michigan University, Cooley School of Law.

Biographical Information Douglas C. Kleiner, Director - Indirect Tax Grant Thornton LLP, 3825 Edwards Road, Suite 430, Cincinnati, OH 45209 513-345-4631 douglas.kleiner@us.gt.com Doug Kleiner is a director with over 20 years of state and local tax experience, including over 10 years with “Big 5” public accounting firms. Prior to joining Grant Thornton, he was the Senior Manager in charge of Transaction and Property Taxes for a billion dollar local, long distance and wireless telecommunications and technology services company. Doug serves as an indirect tax SME for multiple states including Ohio, Kentucky and Indiana and is an industry SME for gas and electric, telecommunications and the software industry. Additionally, Doug specializes in sales, use, and transaction tax issues affecting the manufacturing, gas and electric, telecommunications, mining, computer hardware and software systems, construction, oil and gas, distribution, retail, transportation and various service industries. He manages multi-state sales and use tax audits for Fortune 500 companies, supervises tax refund projects, performs indirect tax due diligence reviews, implements process improvements, negotiates audit settlements, directs compliance procedures, and negotiates, implements and reviews direct pay permit procedures in multiple states. Doug also offers technical expertise in personal property and payroll tax. Doug has been published in The Journal of State Taxation and is a frequent speaker on sales and use tax topics. Organizations include Tax Executives Institute, Manufacturers’ Education Council’s Ohio Tax Conference, Indiana Chamber’s Indiana Tax Conference, Council on State Taxation, Lorman Education Services, Grant Thornton’s internal training, client specific tax training and regional Indirect Tax Roundtables. Doug graduated from Wofford College with a Bachelor of Arts in Accounting, and he is a member of the Institute of Professionals in Taxation.

1 Leveraging Technology & Data to Improve Tax Compliance, Audit Defense & Produce Significant Tax Savings Fred DiIorio , Sr. Tax Counsel , General Motors Company Kyle Sollie , Partner , Reed Smith LLP Doug Kleiner , Director , Grant Thornton LLP

Overview 2  Using Big Data in State Tax Audits  Data Analytics  New Tax Technologies

Effective Tax Department 3  Timely and efficient compliance  Organized and streamlined processes  Apply up-to-date policy and lessons learned  Manage time and minimize risks  Successful audit outcomes  Prepared for the issues before they are raised by the auditor  Apply lessons learned from prior audits  Organized and streamlined processes to move audits forward  Owe little to no tax

Big Data in State Tax Audits 4 4

Challenges of State Tax Departments 5  Time and resource constraints  Canned reports frequently do not meet the needs of state tax  Recurrent changes to systems, processes, policies and personnel  Lack of support from IT and functional business groups

Building a Dataset 6  AP data inconsistent, no sales/use tax field, invoices not organized  Import data and invoices into e-document tool  Corrected errors and extracted additional fields using OCR and outsourced temporary help  Analytics to categorize invoices and issues  Data, invoices, and supporting evidence along with analytic tool in one application  Handles multiple users across offices 6

Multiple Data Sources 7  Feed multiple data sources into single portal  Payroll and employee records  AP , Purchase Orders, Asset reports  Tax matrices, exemption certificates  Unstructured data—photos, floorplans, invoices, product manuals, job descriptions  Leveraging multiple data sets to create new data 7

Telecom Industry 8  Tax Problem:  Equipment used for both voice and data, but sales tax exemption only for voice  Tax Department Initial Data:  Equipment list and ship-to location  Linked Additional Data:  FCC cell tower list, zip code coordinates, customer billing data  Solution:  Matched each customer to specific tower

Consumer Products 9  Tax Problem:  Ultimate destination of products after shipment to customer distribution centers  Tax Department Initial Data:  Sales data included customer name, revenue, and shipping address  Linked Additional Data:  Customer retail locations and sq. footage  Solution:  Able to show relative product distribution from DCs to ultimate consumer markets

Consumer Products 10 Department Store Distribution Department Store’s sq. footage Center-Ohio across U.S. Amount of product going to Department Store’s in Ohio based on percentage of sq. footage

Report Based Auditing 11  Advocate for using reports instead of invoices  Especially for EDI purchases (Ariba; PO based)  Validate accuracy with small sample  All invoice data on the report  Allows time for assessment of the data instead of pushing paper  Gaining more traction with auditors  Developing solution for non-EDI purchases 11

Information Access and Sharing 12  How to share datasets across many users  Size limits  Data security  Collaboration  Data integrity and maintenance  Web-based interface and repository provides instant access for tax department and auditors  Supplement with web-hosting and video- streaming applications 12

Microsoft SharePoint 13

Case Study Hawaii Audit 14  Excise tax appeal involving millions of transactions and lines of data  Multiple users (taxpayer, counsel, auditor)  Database too large to process on normal PC  Multiple versions of dataset; risk of confusion  Data and documents uploaded to secure Extranet—auditor accesses remotely  Video conferencing instead of in-person meetings 14

Data Analytics 15 15

Analytics – End-to-End Process 16 Extraction Staging Analysis Reporting . . Database Staging . • Leverage existing data • ERP SAP/Oracle/JDE, • Insight on tax over- & • MSSQL/Oracle/DB2 – warehouse/system • Tax Engine underpayments, compliance Qlikview/Tableau/Spotfire functionality to obtain data Sabrix/Vertex/Taxware risks and tax planning • Transform opportunities Data & Analytics

Data Analytics and Dashboards 17  Real time, compliance control and forecasting  More than just a pretty picture? 17