We are a team of former Big 4 partners with over 100 collective years of state and local tax consulting experience. 
State Tax Services
States impose various taxes on businesses, including income/franchise, sales/use, property and unemployment taxes. The tax bases and the application of these taxes are often related and interwoven.
Effective consulting on one type of tax requires a detailed understanding of the other types of taxes - it does no good to save $100 of income tax if the same action costs $1,000 of sales tax.
Recognizing these interrelationships, Barnwell & Company has assembled a staff well-experienced in all aspects of state taxation and is capable of providing a full spectrum of state tax services including:
* State income & franchise refund tax analysis
* State income & franchise tax planning
* Sales & use tax refund analysis
* Sales & use tax planning
* State and local credits and incentives
* State income/franchise & sales/use audit defense
* Special state tax projects
* Federal and state fuel tax recoveries
* FIN 48 reserve mitigation
Federal Tax Service
Barnwell & Company also provides federal tax consulting services including:
* Meals and entertainment account analysis
* Federal wage-based credits
State income & franchise refund tax analysis
We analyze previously filed state income and franchise tax returns to determine if any taxes have been overpaid. We focus on apportionment, state tax credits, law changes, court cases and tax base issues. In addition to evaluating refund opportunities, we try to identify exposure areas.
Our role is to advise. We will only file refund claims that the client wishes to pursue after a full discussion of the attendant opportunities and risks.
Our service includes all aspects of the refund process, from identifying the claim, providing technical authority for the claim, obtaining client authorization to file, preparing the claim and following up with the state to ensure the refund is processed and received.
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State income & franchise tax planning
It is our experience that corporate evolution often causes companies to have a sub-optimal structure from a state tax standpoint. It is the objective of state tax planning to create the optimal state tax structure without adversely impacting or interfering with business operations.
Our goal is to create state tax plans that are "multi-tax/multi-state," i.e., plans that will generate savings of unemployment, sales/use and other taxes in addition to income/franchise taxes and will generate savings from several different jurisdictions.
To withstand a state tax audit, a restructuring must have business purpose. For example, state tax authorities are unlikely to respect a restructuring done for the sole purpose of saving state income tax. However, when a restructuring saves several types of taxes, the saving of one type of tax provides valid business purpose for a restructuring that saves a second type of tax. Moreover, we try to build redundancies into our state tax plans.
Redundancies are strategies that overlap such that the same dollar is saved twice. Redundancies minimize planning risk since the success of one strategy will mitigate the failure of another. Finally, implementation is the foundation upon which state tax planning is built. Unless state planning is implemented following appropriate legal and operational formalities, the plan will be vulnerable to attack by state tax authorities.
Effective tax planning requires an in-depth understanding of a company's tax posture. Accordingly, we normally propose to do a planning project in conjunction with a tax refund analysis. A tax refund analysis provides us the opportunity to closely examine a company's state tax position. Furthermore, to the extent that the refund analysis finds tax refunds, these refunds can help pay for the tax planning.
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Sales & use tax refund analysis
Each of the forty-five states imposing a sales tax uses different tax laws and theories to impose the tax. For example, in one state large marsh mellows may be considered “candy” and taxable, while in that same state small marsh mellows may be considered “food” and exempt. Some states use the “integrated plant theory” so that most equipment touching a manufacturing facility are exempt from use tax, while others narrowly allow, if at all, a manufacturing exemption. Further complicating the landscape, this area leads to a never-ending flow of changing authority, including changing laws, regulations – and most notably, case law, from the trial level to the U.S. Supreme Court.
It is virtually impossible for a tax department with multi-state operations to keep abreast of the changing landscape – let alone the typical “in flux” nature of most American businesses. Finding Refunds
Armed with the most current authority and case law, we begin our process by thoroughly understanding our client’s business operations. With “contextual knowledge” and up to date authority we are in the best position to identify overpayments. Our process is designed to thoroughly review a company's accounts payable records for sales and use tax overpayments. This is a detailed procedure and requires a complete understanding of multi-state sales/use tax laws and regulations. The focus is on accounting errors, the application of various tax exemptions, such as the manufacturing exemption, and the applicability of sales taxes to certain items, such as electricity used in manufacturing.
As with income tax refund analysis, before we recommend a refund claim we evaluate the client's exposure. We will not move forward until the client is comfortable that the benefits exceed the potential risks.
Our contingent fee for this analysis is based on the refunds received by the client net of identified exposure items, if actually imposed. Our fee arrangement contrasts with most sales/use tax consultants who charge a percentage based on the gross refund without regard to any offsets for exposure items
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Sales & use tax planning
Similar to income/franchise and unemployment tax planning, sales/use tax planning requires an understanding of the multi-state/multi-tax context.
Good planning in this area takes into account the operations of a company, business purpose for changes to legal structure and the impact the plan may have on other state taxes.
The best planning in this area may involve "combination strategies" and "redundancies" as described above on income tax planning - as well as the wherewithal to implement.
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State and local credits and incentives
Given the multi-jurisdictional posture of most companies in the United States, the opportunity for credits and incentives is vast but complex. We find that companies often are not claiming credits because they are unaware of the credits or the cost of identifying the opportunity is perceived to outweigh the benefits.
In many cases, the company's perspective on this issue is correct - the credits are small or require so much detail that obtaining them is cost prohibitive. The challenge is to know which credits and incentives are worth the effort.
Our experience in this area enables us to advise clients on this issue. Furthermore, our experience with credits and incentives allows us to obtain benefits efficiently with a minimum of client effort.
Recent advances in technology generally have made the credit procurement process easier. For example, information is often available on the Internet to determine whether a company has a location in a state enterprise zone. We have found that clients are willing to reevaluate the opportunity for credits in light of changes in information availability and credit administration that have made credits easier to obtain.
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State income/franchise & sales/use audit defense
Handling a state tax audit is more of an art than a science. Should you agree to extend the statute of limitations? Does this state normally waive penalties? Will the state share your information with other states? Does the auditor have authority to settle? The list of issues is endless.
Our approach to assisting clients in this area is flexible. If desired, we can literally handle the audit from the very beginning.
Alternatively, many clients prefer to partner with us, or use our expertise on an as needed basis. Finally, the client could handle the audit internally and then retain us to review the audit before agreeing to the final assessment.
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Special state tax projects
Clients often have the need for expertise or assistance on "one-off" projects in the state area that exceeds in-house resources. For example, a company may have nexus or be taxable in a state but has not previously collected sales tax. This may require an anonymous intervention on behalf of the client.
We have also assisted clients that are faced with the daunting task of filing multi-state amended returns as the result of a federal audit.
In many cases these returns are due 60 days after the federal audit is concluded. Our broad state tax experience permits us to assist on any project in the state area you may have.
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Federal and state fuel tax recoveries
Barnwell & Company’s fuels tax experts have substantial expertise working with clients in identifying, filing for, and securing federal and state income and excise tax refunds relating to off-highway and alternative fuel taxes. We have also performed audit support of federal and state fuels tax matters for clients in a variety of industries.
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FIN 48 reserve mitigation
Resolving Uncertainty
Public companies must account for income tax uncertainty under FIN 48 for years beginning after December 2006. For many companies FIN 48 presents complex state income tax issues, with overlapping considerations - often resulting in significant reserve balances.
Rather than providing FIN 48 accounting support services, our firm has focused on assisting companies with the FIN 48 reserve that has now been established. For example, in a recent project we were able to file protective refunds for sales that, prior to FIN 48, had been thrown back to the state of origination. Throwback was no longer required since we assisted the company with voluntary disclosure processes in destination states.
FIN 48 mitigation results in meaningful tax rate reductions - because the recognition of previously unrecognized tax positions post-FIN 48 may be taken into income. This rate reduction is unique, since the initial FIN 48 reserve was booked against retained earnings.
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Meals and entertainment account analysis
Companies often understate their tax deduction for meals and entertainment ("M&E"). Tax rules limit the deduction for most, but not all, M&E expenses to 50% of actual cost.
However, the book M&E account often includes items that are not subject to the 50% limitation. The tax M&E limitation may be overstated if it is based on the book M&E account, causing taxable income to also be overstated.
Using a non-intrusive and efficient process, we review the M&E account, applying relevant tax rules to minimize the M&E limitation by correctly classifying M&E expenses for tax purposes.
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Federal wage-based credits
Through several wage-based income tax credits, the U.S. government provides incentives to employers to hire members of targeted groups having a particularly high unemployment rate or other special employment needs. By utilizing these credits, employers can effectively reduce their cost of labor. Many employers forego these credits due to the cost, complexity and time intensive nature of their administration.
Harnessing Internet technology, we have developed a process to enable clients to obtain these credits while minimizing the related administrative effort. Our service is flexible and can be coordinated with clients' human resources function.
We also provide related support to ensure that clients obtain maximum credits. We train client personnel on the proper processing of tax credit documents. We design and implement systems to motivate hiring managers (utilizing both "carrots" and "sticks") to participate in the tax credit program. We provide feedback to management to enable them to monitor and manage the tax credit program.
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SERVICES
We offer a broad range of services to assist our clients in taking advantage of every tax savings opportunity, including:
OUR SERVICE GUARANTEE
In every client engagement, we guarantee our service. This means that if the client is unsatisfied with our work, we will adjust or eliminate the fee. Our firm policy is to never leave a client unsatisfied. Period.
We offer a broad range of services to assist our clients in taking advantage of every tax savings opportunity, including:
- - State income & franchise refund tax analysis
- - State income & franchise tax planning
- - Sales & use tax refund analysis
- - Sales & use tax planning
- - State and local credits and incentives
- - State income/franchise & sales/use audit defense
- - Special state tax projects
- - Federal and state tax fuel tax recoveries
- - FIN 48 reserve mitigation
OUR SERVICE GUARANTEE
In every client engagement, we guarantee our service. This means that if the client is unsatisfied with our work, we will adjust or eliminate the fee. Our firm policy is to never leave a client unsatisfied. Period.
©2008 Barnwell & Company, LLC.
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