COST Sales Tax Conference Orlando February 25, 2015 Deb Elmo JOHNSON & JOHNSON Jim McGowan STAPLES Kevin S. Berry GE

2 Best Practices Transaction Tax Audits

3 OVERVIEW Best Practices Audits  Preparing for an audit  Dealing with auditors and requests for information  Handling disputed issues / assessments  Effectively resolving protests Communication  How to communicate the effectiveness of Audit Team to upper management  How to get recognition for Audit Team’s efforts

Has your company ever refused to sign a waiver requested by a taxing jurisdiction? A.Yes B.No 4 5

5 BEST PRACTICES Preparing for an Audit  Verify audit notification details (Taxpayer/Audit Period/etc.)  Be aware of your company’s statute waiver policy and Statute of Limitation issues  Review list of documents auditor is requesting  Review returns  Review results of prior audits / Have prior issues been corrected?  Understand potential under and over payment issues  Evaluate whether audit can be resolved more efficient manner

Has your company been asked to do a computer assisted state transaction tax audit? A.Yes, we gave the state the file they requested. B.Yes, however, our company was unable to comply. C.No – never was asked to do a computer assisted audit. 6 5

7 BEST PRACTICES Dealing with audit requests for information  All requests for information need to be in writing  Establish timelines and expectations  Pay attention to waivers and the dates - Push back  Answer all requests truthfully – If you don’t know the answer find out before answering “off the cuff”  Only answer “the question” asked and document what you give to auditors - Don’t say too much  Be aware of systems abilities and computer assisted audit requests  Dealing with difficult information requests (Apportionment/etc.)

How does your company handle post- audit protests? A.Handles internally. B.Hires outside assistance. C.Strives to resolve at the audit level and never appeals audit issues. D.All of the above. 8 5

9 BEST PRACTICES Handling disputed issues / assessments  Always work on issues at the audit level first (move up chain of command – i.e. supervisor and up)  Confirm Statute of Limitations on issues. Closely read all notices and know your deadlines  Use all available resources – inside and outside specialists.  Internally communicate issues and potential financial impact (Tax+Penalty+Interest) as quickly as possible.  Make sure that business is properly reserved for potential impact of issue

BEST PRACTICES Effectively resolving protests  Know your statutory deadline dates  Follow procedures strictly  Settlement is your friend – try and use it  Consider hiring local, outside firm 10

11 BEST PRACTICES Communicating Audit Results to Management  Communicate issues / exposure throughout the audit process Surprises at end of audit = Bad Communication  Create audit closure report that includes audit error details Communicate details to correct audience and ensure errors get fixed  Highlight potential audit issues avoided (scope reduction / negotiation / unbundling / proper application of law) Tax savings / avoidance is best sales pitch for Audit Team  Communicate efficiency of audit efforts Need to communicate both audit effectiveness and efficiency

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13 SUMMARY BEST PRACTICES  Proper Audit Preparation + Planning = Effective / Efficient Audit  Get involved and know your business  Resolve issues at lowest possible audit level  Know your audit remedies  Communicate potential audit issues and financial impact to management as early as possible  Communicate results/details of audits and follow up to ensure that errors / faulty processes are timely corrected