Workshop P CAT, Sales & Use and PTE Audits...Best Practices to - PDF document

Tuesday & Wednesday, January 28‐29, 2020 Hya� Regency Columbus, Columbus, Ohio Workshop P CAT, Sales & Use and PTE Audits...Best Practices to Effectively Plan & Manage the Audit Process Tuesday, January 28, 2020 3:00 p.m. to 4:00 p.m.

Biographical Information Amy Thomas Laub, Director, Tax, Nationwide Insurance Company 1 W. Nationwide Blvd, Columbus, OH 43215 614-249-7070 thoma30@nationwide.com Amy Thomas Laub works for Nationwide Insurance Company, which is headquartered in Columbus, Ohio. As Tax Director, she is primarily responsible for state income tax and sales & use tax areas. Prior to joining Nationwide, she worked in the Tax departments for Tempur Sealy International, Inc., located in Lexington, Kentucky, and Federal Express, located in Memphis, Tennessee. Amy has experience with multiple areas of state taxation including compliance, audits, planning, policy and incentives & credits. Amy currently serves as Immediate Past Chair for the Council on State Taxation (“COST”). She is only the third woman to chair COST over the past 48 years. Amy is a member of the COST Board of Directors. She participates in numerous conferences and schools as a speaker and a facilitator. Amy is a licensed CPA and received her B.B.A. degree in accounting from the University of Cincinnati. Chad G. Leon, Assistant Administrator, Audit Division Ohio Department of Taxation, PO Box 183014, Columbus, OH 43218 (614) 800-3967 Chad.Leon@tax.state.oh.us Chad is an Assistant Administrator for the Audit Division of the Ohio Department of Taxation. He has over fifteen years of experience in Sales and Use tax. Chad began his career with the Ohio Department of Taxation in December, 2002 as a sales and use tax auditor in the Akron District Office. He was promoted to a Sales & Use tax audit manager in January, 2010 and held that position until he received his current position in July of 2015. Chad has audited exclusively in Sales and Use tax throughout his career and has experience in numerous industries including manufacturing, contracting, automobile dealerships, restaurants and trucking. Chad is a graduate of Malone University with a B.A. in Accounting and Business Administration. John R. Trippier, CPA, Director (non-attorney professional), Zaino Hall & Farrin LLC 41 South High Street, Suite 3600, Columbus, OH 43215 jtrippier@zhftaxlaw.com 614-349-4815 Fax: 614-754-6368 John is Director of Multistate Tax and serves clients with more than 31 years of experience in government, public accounting/law firm and industry. He assists clients with evaluating current multistate tax positions to identify refund opportunities and to mitigate potential exposures. John also uses his previous Department of Taxation experience to defend clients throughout the audit process, which helps to ensure the client pays the minimum due. John is a certified public accountant who served as the Administrator of the Ohio Department of Taxation’s Audit Division for over eight years beginning in 2003. At the Ohio Department of Taxation, John was responsible for developing and implementing audit policy for the sales, use and commercial activity taxes. He was the architect for the commercial activity tax audit process and the audit tools that are used by auditors and managers to research taxability issues. John also spent two years as an income/franchise tax and sales/use tax auditor in the Department’s Chicago office. John has worked over 10 years in public accounting as a state and local tax consultant for Coopers & Lybrand, KPMG Peat Marwick and RSM McGladrey, Inc. As a consultant, John assisted clients with multistate sales/use, income/franchise, personal/real property, intangible and unclaimed property tax audits and appeals. John also assisted clients with multistate refund reviews, corporate restructuring, compliance studies, nexus studies, voluntary disclosures and sales tax software implementations. John also worked 9 months for the law firm of McDonald Hopkins where he was director of Multistate Tax Services. John worked in industry as a state and local tax manager of a telecommunications company responsible for audits, appeals and state and local sales/use, personal/real property and income/franchise tax compliance. John is a frequent presenter on Ohio sales, use and commercial activity taxes for the Ohio Society of CPAs, Ohio Business Tax Conference and various other associations throughout Ohio. John is also a frequent presenter for the Council on State Taxation (COST).

2020 Ohio Business Tax Conference Workshop P: Best Practices to Effectively Plan & Manage the Audit Process January 28, 2020 Amy Thomas Laub, Nationwide Insurance Company Chad Leon, Ohio Department of Taxation John Trippier , Zaino Hall & Farrin LLC

Notice This document and information is provided by Zaino Hall & Farrin LLC for general guidance only, and does not constitute the provision of legal advice, accounting services, investment advice, written tax advice under Circular 230, or professional advice of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult with a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Agenda • Audit Division Update • Top 10 Components of an Audit • Case Study 3

Presentation Approach • General information focusing on the audit process • Focusing on Ohio audit process, but concepts apply to all states • Examples focus on Ohio sales/use tax and commercial activity tax, but concepts apply to all tax types 4

Audit Division Update • Audit Selection • Limited Scope Audits • Penalties • Direct Payment Permits • Refunds • Karvo Paving Co. v. Testa , 2019‐Ohio‐3974 (9/30/2019) • Nationwide v. McClain, BTA (10/22/2019)/Info. Release 1999‐01 5

Audit Division Update Audit Selection • Predictive and Trending Analytical Models • Cross tax comparisons • Peer group comparisons • Tax filing trends • Etc. • Leads are analyzed and assigned, if taxpayer appears to be non‐compliant • Leads involve various tax types, industry sectors and geographic locations • Selection and assignment processes are objective, efficient, fair and equitable • Ultimate goal is increased taxpayer compliance 6

Audit Division Update Limited Scope Audits • Limited Scope • Analytics from audit selection indicate areas on potential non‐compliance • Middle ground between discovery inquiries and full‐fledged, multi‐issue field audits • Fewer records requested • Increase the number of non‐compliant taxpayers contacted 7

Audit Division Update New Audit Software • Rolled out • Applies to audits started once the tax was integrated into BRUTUS • Sales/Use tax • New reports • New statistical sampling method • CAT • Complete change from previous software • IFTA/IRP and Employer Withholding • Have been integrated into BRUTUS • Pass Through Entity • Has been incorporated into BRUTUS • Financial Institutions & Petroleum Activity • Currently in the process of being incorporated into BRUTUS 8

Audit Division Update Penalties • Application of statutory penalty on audits that result in a tax due liability • Reduces subjectivity of penalty application • Increases consistency in treatment of taxpayers • Penalty Reduction • Penalty group within the audit division reviews all requests for penalty reduction on all requests prior to assessment • Reviews TP request, facts and findings of the audit, audit history, cooperation during the audit and other items to make fair and consistent decisions • Moves penalty decision to the administrative level 9

Audit Division Update Direct Payment Permits • ODT contacting all DPP holders (Began May, 2015) • More than 90% of the review has been started and/or completed • Over 30% of the original accounts were deemed unnecessary and/or cancelled • Consideration being given as to whether DPP is optimal reporting method • Goal: increase accuracy of compliance of DPP holders • Significant over or underpayment of tax can result in revocation of one’s DP authority 10

Audit Division Update Direct Payment Permits • ODT intends to conduct follow‐up reviews moving forward to better manage the program and ensure that changes in procedures, accounting systems, business model, etc. are being communicated with ODT • TP must communicate to ODT any changes in accordance with the agreement 30 days prior to making them • Direct payment authority for paying sales and use tax is a privilege granted to businesses to promote the efficient administration of Ohio’s sales and use tax law pursuant to ORC 5739.031 11