SALT Through The Years with Bruce Nelson

Hosts & Guests

Judy Vorndran

Alexander Korzhen

Bruce Nelson, Editor-in-Chief of the Journal of State Taxation


SALT Through The Years: The Adversarial Relationship between Taxpayers, Revenue Departments and Legislators, a discussion with Judy Vorndran and Bruce Nelson

Alex Korzhen [00:00:04] Welcome to SALTovation the SALTovation Show, it is a podcast series featuring the leading voices, Insult, where we talk about the issues and strategies to help you make sense of state and local tax. Hello, everyone, and welcome to the podcast. I'm Alex Korzhen. Before I introduce the topic and our guest today, I think I'd like to share a really quick story as to how we got to the topic. I had a client call some time ago where they were sharing a story with me, where they had a dispute with a subcontractor. They were in a contracting business, and the subcontractor escalated the dispute directly to the state. And the response from the state was, you know, you should do X because where the state and we know best and we say so that really stuck with me for a while. And I've been percolating on this perspective that I think we as practitioners come across from time to time. And it led me to have this podcast. And the topic is the adversarial nature relationship between practitioners, tax payers, the departments of revenue and legislators, and how that has changed over time, if at all. And with that, I'd like to introduce our guest. Our guest today is Bruce Nelson. He has a friend who has had a front row seat into these adversarial relationships for, I think approximately 40 years. Bruce has been practicing and is now an instructor for the EPA and an editor at the Journal of State Taxation, where he gets to dig into state controversy and highlight hot topics for national audiences. Welcome to the show.

Bruce Nelson [00:01:53] Thanks, Alex.

Alex Korzhen [00:01:54] And also, we have Judy Vorndran from SALTovation. Glad to have you here.

Judy Vorndran [00:01:59] Thank you, Alex.

Alex Korzhen [00:02:00] Let's dive right into it. I think, Bruce, when you and I spoke a little bit about this topic beforehand, and you mentioned that there is actually a larger picture here that Rabson political issues, economic issues, technol technological changes. Could you speak a little bit about how all that comes together to create the environment leading up to the decision in 1992?

Bruce Nelson [00:02:29] Sure. Let me start by saying I do think that the relationship between taxpayers and tax administrators and legislators and so on and so forth has become more divisive and the order to become more difficult. And the states have certainly become more aggressive. And I think there are several larger issues that we sometimes forget about. Sort of creating that situation, I mean, not the least of which is I mean, you could actually go back to, say, 1980 when Ronald Reagan won the election, starting with Ronald Reagan. And going forward, the federal government has been pushing more and more costs off of themselves onto the states. So the states need more money. At the same time, we're moving from we all talked about this and all kinds of venues from a manufacturing environment to more of a service communication information environment in terms of our economy. And so the traditional tax base is starting to shrink some since the 1950s and 60s. Certainly. I think one other thing that's happened is there's institutional knowledge that's been disappearing. I mean, all the baby boomers like myself. And I want to thank you, Alex, for reminding everybody how old I am. And I've been doing this for 40 years,

Judy Vorndran [00:03:54] but young at heart, young at heart and young in disposition in many ways

Bruce Nelson [00:03:59] to do your duty or so kind to old old guys your parents raised. Right. So so one of the things that I think has happened is that when a lot of the baby boomers who started working in the nineteen sixties for revenue departments all started retiring and the if not the late 80s, the 90s, and you had a lot of institutional knowledge that went out the door, a lot of experience that went out the door. And you have a lot of younger auditors now, newer folks in there who don't have that institutional knowledge because, for example, when I first started doing work with state and local, many times we could resolve so many issues on the audit. You would sit down with an auditor. The auditor had been around the block a few times. He or she was experienced, had some knowledge, and a lot of times you could settle a lot of smaller issues, not not substantive issues, but smaller issues in the audit. And then if you had to file a protest and go forward, you only took the larger issues with you. That has largely disappeared in my experience. In my experience, the auditors come out, they put together their work papers. You sit down and go over to work papers with them. They say, yeah, yeah, OK, I understand they don't change anything. And they turned it in. And you have to file a protest to get rid of issues that ordinarily you could have resolved. And I think what's driving that is the states are under well, especially now with the pandemic. I think in the next two years, all the states are going to be focused on trying to balance their budgets. So they're under enormous fiscal pressure for all of these reasons, their pensions now are large because all of us baby boomers have retired. Well, except for me, I mean, it gives me pause when I look in the mirror in the morning because I called Florida just the other day to talk to somebody down there about an issue. And the person said, oh, no, he passed away two years ago, Bruce. Oh, no. So, you know, but no, I think one of the things that's happening is when I was at the Department of Revenue, for example, in the 80s, we got a lot of training. And Tegmental, who was the chief auditor at that time, wanted all of the revenue agents to get their certifications and become CPAs or whatever. You got time off to go to conferences and training. Now, my understanding is if you want to go to a tax conference or training, that's fine. It's on your dime and it's on your time. You have to take vacation time to do that. Well, if you're a revenue agent, are you really going to take your own vacation time and pay for your own training at a conference, or go to any sort of IPT or cost conference? I don't I don't think so. And so we've got newer auditors with less training, less experience many times through no fault of their own. And you've got states that are trying to get these auditors to do more on it in a shorter amount of time, because fiscally they're being crunched by technological change, by economic change, by demographic changes. All those kinds of things, I think led up to Cuil and and actually have continued since then.

Alex Korzhen [00:07:33] Judy, any thoughts?

Judy Vorndran [00:07:34] Well, I was just going to comment. What I think is also the case is you've got people who are used to doing things by paper. I mean, when I got started and did sales tax returns, I filled out coupon books. They did not fit the copy machine. I had to actually open the lid, put the thing down, and make a copy. I mean, then we transition to the fee filing. And so there's that transition in technology and wherewithal. And so you forget how hard things were. And so there's a thought about it being easy, whereas the easy button. And then I think there's a lot of latitude being taken away from the audit level where if you schedule it, it has to live on the work papers. It doesn't get taken away. Supervisors say, I don't get it. I'm not going to opine on them to let it ride. And I noticed that actually in twenty seven, twenty eight as well, we had our downfall. What was that? The recession. And there was a lot of inflexibility. And I thought, I can't believe we're going to have to sue to get some of these issues resolved. And I think as you're stating, if it's a fifty thousand dollar tax issue, you're not going to sue. You can't make up the fees for the legal services to compensate for the tax output. So you're just going to settle. Plus, you're looking at three years to take a dispute forward. So it has to be material enough for your business to live with that UN resolution for a period of time. So I think you find this Push-Pull with auditors that is very disadvantageous to a taxpayer and really, honestly, quite disheartening in terms of their understanding of the business model. And then don't know, like you were saying, they want you to get your CPA. Several years ago, when I was building up the tax practice at a regional firm in my state local area, I wanted to hire State Otter's and City Otter's. And when I went to get their credentials, I found that many of them were not CPAs. So I thought, I can't bring him in. I'm an accounting firm, I need a CPA certification or they're never going to be able to advance. So you didn't always find that they had the right educational background to even work as a consultant, mind you, there at the state. So there was definitely a layer of education that was being skipped and thinking, OK, we'll just bring these people in and we'll train them on the job, which means they don't have financial background, which I think is problematic. You can't just train for an audit and you have to understand business as a whole.

Alex Korzhen [00:09:51] So given these rising pension costs that the states were experiencing, the changes in the economy shifted from a traditional industrial manufacturing type of economy to a more technological service based economy in the late 80s and early 90s and the political environment as well. Cuil really was a pretty huge blow to the states, wouldn't you agree?

Bruce Nelson [00:10:22] Yeah, that's right. As a matter of fact, Cuil was the first court case I ever downloaded online. I was actually at training. I was actually at a training conference when the decision was handed down. I wasn't on AOL. I think it was Prodigy at that time. And I downloaded the case that night and read it and was able to talk about it the next day at the coffee shop. And not knowing that the monster I had, I just joined forces with that now, you know, case is handed down and a client expects you to be able to opine on it 15 minutes after it's been published. But anyway, yeah, no, I think Quill was, quote, is a big setback for the states. It really was. And from the moment Quill was decided, the states were trying to work their way around, it eroded overcommit. The streamlined sales tax initiative was started immediately after Cuil. You know, that's the initiative where there's about 20 some states now where the states got together and thought, well, wait a minute, if the US Supreme Court says that complexity is an important impediment to interstate commerce, well, we're going to simplify things. And once we get it all simplified, then we can go back to court and we can win. And Cuil because, you know. Complications and five thousand ten thousand sales tax filing jurisdictions is not a problem anymore because we've simplified not an impediment to interstate commerce. And at the same time, they started pushing on what is the definition of tangible personal property. How do you define physical presence to the point where now we've got this ridiculous standard that came out just a few years ago with, I believe, Ohio, Massachusetts, that cookies, cookies on your computer are physical presence. I mean, good grief. Give me a break. So they've been working, trying to erode and undermine Cuil for years. And they've introduced legislation in fairness, they've introduced legislation almost every year in the US Congress that would give states the authority to require remote sellers to collect. And it never got anywhere. I mean, almost every year just simply died in committee. So they're very frustrated that at the same time all these other pressures are putting upon them. And I think to some extent, legislators are also I mean, we're all part and parcel of this, but legislators many times simply don't understand. And I think the Wayfair case was a good example of that, where one of the justices said something to the effect that, well, you know, now you've got software. So it's easy. And I'm like, really? Really. You think that? OK, so that means that when Turbo Tax came out, income tax became easy. So what does it take you? Let's say you got a parent corporation in three subs and you're doing a consolidated return. What's to take you now? 15 minutes? Oh, right. It doesn't. Software software is enormous help and processing and procedure and administration. It does nothing to address the complex. The underlying complexity that someone has is faced with when having to file, you know, and thousands of sales tax jurisdictions.

Alex Korzhen [00:13:55] Yep. Right. Absolutely. So interesting. I'm glad you mentioned the cookies. But even before cookies, we had, you know, affiliate distributional principles that were developed. Click through Nexus, starting with New York in two thousand eight. We had noticed and reported out of Colorado starting in 2010.

Bruce Nelson [00:14:19] Yes. I'd like to point out, you know, that Colorado was on the cutting edge of two issues. One is, you know, we were on the cutting edge of notice and reporting with Nexxus standards, and we were one of the first to legalize marijuana. So we want to be sure and get that on the record.

Alex Korzhen [00:14:36] Well, kudos to Colorado.

Bruce Nelson [00:14:38] Yeah.

Alex Korzhen [00:14:39] Oh, yeah. So good. Good tax policy, good tax law. Or do you think that all of these are really just more or more of the same, whereas just seeing how far you can push the envelope to try to fill the coffers?

Bruce Nelson [00:14:57] No, I think that's exactly it. It's it's what's driving. This is because they need funds. OK, and so, you know, they're putting pressure on the auditors to be as aggressive as they can. They're putting pressures on the auditors to get as many audits done as they can. And they're doing things that, you know, years ago I would have never seen. I mean, a recent example is the Agilent Oracle case in Colorado, where the Department of Revenue actually went to court arguing that their own regulation was wrong. And, you know, our response was, look, if you want to change the law, that's fine, there's a process for that. There's a procedure for that. You introduce legislation in Colorado. We have this unique problem of TABOR Taxpayer Bill of Rights where if it increases tax revenue, everyone gets to vote on it. And so the Department of Revenue knows, OK, well, we're not going to be able to probably get this enacted or no one's going to vote for this in an election. I mean, the issue and Agilent and Oracle, we're holding companies and whether or not they should be included in a combined report. I mean, how does that go on a bumper sticker in an election? You know, holding companies should be in combined reports and one kind of bumper sticker that I mean, and so they know those things are going to get passed. And so they're taking positions. And also one other thing, you know, I was at the Department of Revenue back when the regulation was first primarily gaited. And I and we got training at the department revenue that was completely opposite of what the department was arguing and Oracle and Agilent. And part of that is, again, institutional knowledge is gone. I mean, everyone at the department who was involved in that litigation has only been there for like five or six years. So, you know, but you're right. I mean, the department's looking at this and saying, OK, we need more money. Well, can we argue this point? Oh, it's kind of a stretch, but let's try it.

Judy Vorndran [00:17:10] And then also, I think there's a real pulse towards getting out of state voter money. Right. So you can't vote on a policy issue if you're not a state taxpayer. So we want your money, not our money. So I see it as like where our citizens are buying your products and services and therefore we should be able to tax that effort. So and guess what? You don't get to vote on that. I mean, I think if you extend that to lodging taxes, if you think about lodging taxes, they are inordinately high compared to even a sales tax in many jurisdictions. And they are on a lot of things that you normally would consider to be taxable lodging. And it is emboldened because it's passed you on a visitor, not on a taxpayer who lives there. You don't go and see your local hotels, so you have no idea what those costs are. So you're thinking, all right, well, that's the cost of going to Atlanta. That's the cost to go to New York, those taxes. But those taxes were increased partially because you were paying for them as a local. So I just think that some of that policy is very interesting, how governments try to expand their base outside of their own backyard, intentionally, politically palpable. Absolutely not. In my backyard, I don't know.

Bruce Nelson [00:18:25] It would be known, a good example of that is the move to market based sourcing and single sales. That's right. I mean, it's just ridiculous. And, you know, I'm going to pick on Coors and Anheuser-Busch because, you know, we all like beer. But let's say that Coors wants to build another brewery here in Colorado and hire five thousand more people. Think about the impact that's going to have on the infrastructure here in Colorado. You got five thousand more employees. You need more houses, you need more streets. You're going to need more schools for their kids. You've got all that additional impact on the infrastructure in Colorado, but Anheuser-Busch or Coors or any company, they could build that brewery and double their employees and there are taxes in Colorado would not go up a dime because Colorado used a single sales factor. So essentially, we're exporting the tax outside of the state to, as you say, to people who do not vote here. And if you took, say, a little company in Goodland, Kansas, let's say they manufacture backpacks and they sell 90 percent of them to come into Colorado, when we had three factor apportionment payroll, property and sales, OK, their sales factor would be pretty much the only thing they would have in count in Colorado. OK, but they had payroll and property, so you divide by three. So it's mitigated. OK, but now when Colorado goes to a single sales factor, all of a sudden that pulls in more tax revenue from that little manufacturer. And Goodland, Kansas, into Colorado, where, as you say, Judy, they don't vote here. They don't live here. And so, yeah, I mean, Alex, you're exactly right. I mean, there's all these various things that are moving in the same direction of trying to increase the tax base and become more aggressive while doing so.

Judy Vorndran [00:20:31] And, you know, I don't know that we even talked about what Cuil meant, which is the substantial physical presence that was the law of the land, and then the word substantial is what's been slowly but surely eroded to one day in Michigan and California, specifically one day. How could that possibly be substantial? So this pivot to Wayfair, even the economic threshold, I mean, I have a client that sells a five dollar thing. If they sell two hundred of them, which is not very much money in terms of revenue, they have a duty to collect the tax and states with that threshold. So it's you know, some of this doesn't really make sense in terms of materiality, even from a one day perspective. In my mind, you have a remote employee, you have a nexus in a state that's crazy. And now today with covid, of course, you're going to have remote employees, in fact, probably more so than we've ever seen before. So why should that be a detriment to you to hire the right person wherever they want to live and let them work remotely and create a nexus for tax purposes? So there's a lot of things that I don't think make sense from a business perspective that impact taxpayers duties across our land, even if they're not making any money from people in that state where that remote employee is.

Alex Korzhen [00:21:47] Yeah, well, before we get to covid and I do want to touch on that, let's talk about Wayfair a little bit. And I know that most of our listeners are probably very, very well figured out. But let's talk about it from another perspective. So it kind of sounds like leading up to Wayfair, we've had an upward trajectory of adversity with Wayfair as opposed to the states having scored a huge, huge victory. In my mind. They could not have gotten a better result. So does that lead to a kinder, gentler state? Does that lead to ease tensions? Does that lead to taxpayers and departments of revenue holding hands and skipping off into the sunset?

Bruce Nelson [00:22:34] Alex, you're so young. You're so you know, someone once said a comedian once said, every year I become more cynical and it's never enough. No, I don't think that's going to happen. I mean, and particularly because of covid, I don't think it was going to happen even without covid, but with covid. I mean, think about this. Most states have a constitutional requirement to balance their budget. They have to bring in more money and they have been crippled by this covid pandemic financially. And so we're going to see you're going to see well, here's something that we've seen in the last 10 years that we never saw earlier than that, and that is states passing laws that were made retroactive, not just the beginning of the year. We're all used to tax law being passed in December, made retroactive to January. But we've seen litigation with states like Washington and Michigan where they've enacted legislation and made it retroactive for eight to 10 years. I mean, you know, so I don't think that's going to change. I think it's going to get worse. We're going to see more retroactive legislation. I think we're going to see more states legalize marijuana just because they need the money.

Judy Vorndran [00:23:56] Well, they need everybody to chill out.

Bruce Nelson [00:23:58] Well, yeah, I guess, you know, I always joked that Colorado has the worst sales tax compliance of any state in the United States. And I always tell people that the reason we legalized marijuana here was the state legislature had a choice. They could either simplify or tax law or give us another drug to anesthetize us so that we don't feel the pain. And they opted for the latter, unfortunately. But with no Alex, I don't think that's going to happen. I mean, I think it's going to get even worse.

Alex Korzhen [00:24:31] What else can they be looking for again, Wayfair has been a tremendous victory. What loose change are we picking off the ground floor?

Bruce Nelson [00:24:43] Eighty six to seventy two. It's going to be, I think, probably quality six to 70. I know most of our listeners know this, but basically it's a safe harbor provision where if the only thing you're doing in a state is solicitation of sales of tangible personal property and those sales orders are being accepted and filled from outside the state, then you don't have an income tax filing obligation. So if I'm selling widgets in Kansas, I could have a hundred employees working for me in Kansas. But if all they're doing is running around soliciting sales from Dorothy and Toto and sending those sales orders back here to me in Colorado, and I'm filling those orders from outside of Kansas, I have a sales tax filing obligation. I've got unemployment, taxes I have to do. I got wages solely for all my employees. But I don't have to file a corporate income tax return. That public lottery six to seventy two is enacted in nineteen fifty nine. And we've already seen states adopt economic thresholds for income tax filing. But, you know, they'll say if you press them, at least most of the states will say, well yeah. Eighty six to seventy two still trumps that if you're selling tangible personal property. But if you're selling services or intangibles then you're not protected. And I think the next thing they're going to try and knock off is the protection under eighty six to seventy two so that essentially you'll have an economic threshold for sales tax, you'll have an economic threshold for income tax, and you're going to have to pretty much file anywhere if you're of significant size.

Judy Vorndran [00:26:22] Right. And there is the new thing coming out with the update to the public like sixty seventy two, which speaks about cookies and chat boxes and all the interactivity one has with a website. So why would you not have that for your service? Right. Of course you're going to have it. So you're you're you're going to inhibit business from working with our customers remotely if they're going to avoid any tax consequences. So I see a serious erosion where you're going to have an alignment of your sales tax filings, your income tax filings, regardless of what you sell there. So I think that's an interesting and certainly the economy has changed and how we're doing business and more now more than anything, I mean, I feel like the joke is my highlight of every day is when somebody comes by and drops off a package in my front yard, even if it's a mop head, I'm excited. So, you know, we're certainly doing more remote transactions than we've ever had before. But there are questions I've had to have and I've interacted with the vendor on the website chat box. There you go. That's a public lity. Sixty, seventy two erosion is what we're seeing.

Bruce Nelson [00:27:26] You know, and I think at some point you have to ask yourself, you know, are we going back to, you know, when the US Constitution was promulgated, ratified constitutional convention. Seventy in eighty seven. You know, one of the things they were trying to do, the reason we have a commerce clause is because if you were trying to ship goods from New York to Philadelphia and you were trying to go through New Jersey to do it, there were so many taxes and fees and payments you had to make it across New Jersey that you can never make enough money to get a return by the time you got to Philadelphia. So usually you ship the goods. So, I mean, the question is, at some point we've got to ask ourselves, you know, have the states hit the point where these are no longer their tax policies, are no longer matters of local concern, but that at some point the federal government is going to have to step in and say, wait a minute, we need some uniformity here. We need some simplification here. We'll see if it gets that bad. I don't know.

Judy Vorndran [00:28:29] We can't seem to do it now with Cauvin, so I don't know.

Bruce Nelson [00:28:35] But, you know, I guess the short answer to your question, Alex, and I know you may think I'm saying this just because I'm getting old, but I think it's going to get worse. It's going to get uglier. And I don't see any solution to that. And in the meantime, I got to run out and chase some kids off my lawn.

Alex Korzhen [00:28:59] Well, so then given the seeming increase over the years, at least over the last 30 or so years since the tension between the stakeholders here, what have you seen in your dealings with businesses and how have you advised businesses? Well, what are business owners, what should they be expecting? I mean, from my perspective, at least, it does appear that there are. Fewer and fewer taxpayer victories when I read case law these days,

Bruce Nelson [00:29:35] I think that's true. I mean, a couple of things. I used to have this conversation at least once a week. A client would come in and I would say, OK, you're filing in four states. You really should be filing in 13 states. And they would say, OK, Bruce, we don't have the bandwidth to do that. We don't have the resources to do that. We don't have the sophistication to do that. I'll tell you what I'll do, Bruce, just to cheer you up, if I'm going to start filing in eight states, but those eight states are going to take care of maybe maybe the old 80, 20 rule comes into play. It takes care of 80, 90 percent of my exposure. I'm going to file these other states of Arkansas. Once they're twenty one hundred bucks, they're going to have to come after me. And that's a business decision that they have to make. And more businesses are making that decision of, OK, where can we file to to take the biggest bite out of our tax exposure because we simply cannot file, you know, and all the jurisdictions we should be filing now are CPAs. I can't tell them you don't have a filing obligation, but as a business owner, they can come back and tell me, look, this isn't from a cost benefit analysis. This doesn't make any sense to me, Bruce. I'm not going to file in Arkansas or whatever state it is. So that's one conversation. And the second conversation I think I have many times is, as Judy mentioned earlier, you got a thirty thousand fifty thousand dollar assessment. It's going to cost you fifty thousand dollars just to get to district court. So even if you have a good argument, let's say you think you're 70, 80 percent going to win. I mean, are you going to spend fifty thousand dollars and maybe not? I mean, and so there are a lot of businesses that they're losing cases because they're not even bringing the cases forward. OK, so I think it's I think it's going to persist

Judy Vorndran [00:31:38] when I think the other thing that's interesting is I think as business owners talk to one another, right. Nobody says, oh, I got nailed on this audit and it was really bad. Nobody talks about it. Right. So there's a lot of secrets and shame, honestly, for missteps or misperceptions. And I don't think that's a fair look at it. But I have clients who say to me, oh, I can't. I can't tell them I didn't do it right for the last couple of years. I'm just going out to eat it. And I'm thinking, no, absolutely not. You can read the invoice for the tax. You didn't charge them rightfully so. It was their money. Or ask them to tell you what they did to your invoices and pay the tax directly, the audit or otherwise. But there is the shame and there's this lack of transparency because audits are settled and they are never put in the public forum. So unless you and I knew about it and talked to one another and shared stories, there's nothing to read about the audit results. So you really don't even know sometimes what the government is doing to do a deal with this guy or not with that one, because audits have no precedential value. So in an audit I have a situation where we took a case to court. We did lose and the auditors coming in and doing an opposite now, same jurisdiction. Oh, we thought it was this last time. And now we're doing this. We have a court case that says it's this. Did you read it? So that's very disheartening to have to actually straighten the auditor out and say, why are we going here? When this was already addressed, asked and answered by a court of law because we wanted assurance for exactly the reason we're dealing with right now, which is they're changing. They're changing their stripes and going for a different angle. So I think there's just a lack of sharing. It's sort of a secret, you know, and there's so many jurisdictions, there's so many different types of taxpayers that taxpayers don't really have the wherewithal, the information. And frankly, it's the last thing they want to think about. They want to get their invoices out there. They want to get the product out there. They want to just help their customers and move on. And then tax is just an ugly afterthought.

Bruce Nelson [00:33:39] And let me add this one thing to Alex. In all fairness, you know, it's not all been the states. I mean, taxpayers have become much more aggressive in their tax planning and things like that and more sophisticated. And I can point to all these cases that states bring up that I just think are ridiculous. But I can also point out positions the taxpayers take that I just think. What are you thinking? What do you think? So, you know, it's taxpayers and attorneys and accountants. We have our share of blame here, too. That makes this situation worse.

Alex Korzhen [00:34:20] It sounds like the next couple of years are going to be interesting, even with the welfare audit cycle starting to pick up and now with the covid. Fiscal pressures mounting, it'll definitely be interesting to see what happens from an audio perspective and from a legislative perspective.

Judy Vorndran [00:34:40] What do you think? The marketplace is kind of interesting, as I thought. All right. We got Wayfair. We're good, right? But now we're acting them out. We're enacting marketplace laws. I mean, I think we're at plus 30 something states with marketplace laws now, maybe even more of the forty five that have a sales tax. And I thought that's asked and answered. You've got a wayfarer threshold, so why do you need this marketplace thing? So that we are even seeing that legislation continuing to pass has really surprised me and who is a marketplace and who isn't. And you know, as Shopify, a marketplace is a credit card processor, a marketplace. I mean, good golly, like, what the heck is everybody doing to get the money? Right. But I just think there's some surprising results that have happened post Wayfair. And certainly you're going to see whatever it is to deal with the coffers being emptied. So and pushing that to whoever they can to get multiple parties to have to deal with the consequence of sales tax collection at a minimum.

Bruce Nelson [00:35:37] I think it's going to get a couple of observations. One, I think it's going to remain difficult for quite a while. I think it's going to get uglier in the next couple of years. But at the same time, there's going to be a lot of interesting issues. For those of us who love tax, this is going to be a fascinating time to be in it. I confess, you know, and Judy, I'm sure she would confess to the client. They've got these horrible problems and they don't share our enthusiasm for their problems.

Alex Korzhen [00:36:09] I've I've

Judy Vorndran [00:36:09] experienced that.

Bruce Nelson [00:36:10] It's OK. We find it's really, really fun and interesting to go, oh, this is really. Oh, and then you have to stop yourself and say, I'm sorry. Well, we'll help you with this

Judy Vorndran [00:36:22] and the new businesses. I mean, when you think of gaming and I'm going to do this and even businesses that have hotels and they're being more creative and what their offerings are outside of lodging, I mean, there is so many things that business does to get a market to help their customer to sell the thing or the service. And all of those have not been anticipated by the tax law. So it's a very fun puzzle to figure out. And so you have to put your thinking cap on and come up with a broad strategy in order to showcase what they can do. And then to my mind, I like to be in control of that tax structure and not be at the whim and fancy of an auditor. So I'm controlling the narrative. This is who we are. This is how we're complying. This is the piece of the action you get.

Bruce Nelson [00:37:07] That's all you get that offer for any of you who are out there listening to this, who are trying to decide what area of tax you might want to focus on, you will you will be fully employed for the next 30 or 40 years if you go into state and local tax.

Alex Korzhen [00:37:24] Absolutely.

Judy Vorndran [00:37:25] So this is a recruiting podcast as well. Yes.

Alex Korzhen [00:37:31] Well, excellent. I want to thank both of you for joining me today on the SALTovation podcast. If you want to continue the conversation, you can reach Bruce Nelson at the Journal of State Taxation. And Judy, one drink at SALTovation dot com. Join us for the next podcast where we'll be talking to business owners about managing state local tax compliance. And you can find all our podcasts on SALTovation dot com, where you can let us know the topics you'd like to hear if you trust. I'm Alex Korzhen. Until next time.

Questions asked and answered in this Episode:

  • What are the issues that come together to create the environment leading up to the Quail decision in 1992?
  • Was the Quail case a huge blow to the states?
  • Does Bruce think good tax policy and good tax law are just more of the same?
  • Will Wayfair change relationships between taxpayers and departments of revenues for the better as opposed to Quail?
  • What should business owners be expecting since there are fewer taxpayers’ victories in tax law nowadays?
  • Why do we need the marketplace? Who is the market place?

What You Will Discover:

  • [2:29] The issues that have changed the relationships between taxpayers and tax administrators and legislators to become more divisive. 
  • [7:34] How technological transitioning has changed the tax world which has broken the relationship between auditors and taxpayers.
  • [10:22] Ways in which Quail was a huge setback for states.
  • [14:57] Why tax policy and tax law need funds. Things that do not make sense from a conducting business perspective that impact taxpayers’ duties across the country.
  • [22:34] Bruce explains why relationships between taxpayers and state department of tax are only going to get worse due to COVID even after Wayfair.
  • [29:35] How business owners should handle their tax planning and audits to avoid tax cases.
  • [35:38] Why things are going to get interesting in the coming years with business and their taxes.


  • “You can’t just train to an audit, you have to understand business as a whole.” -Bruce Nelson [9:46]
  • “There’s a lot of things that don’t make sense from a doing business perspective that impacts taxpayers’ duties across our land.” – Judy Vorndran [21:35]
  • “I think it’s going to get worse; it’s going to get uglier, and I don’t see any solution to that.” -Bruce Nelson [28:44]
  • “Taxpayers and attorneys and accountants, we have our share of the blame here too that makes the situation worse.” -Bruce Nelson [34:11]