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Why have an independent state and local tax review?

Every taxpayer can benefit from a fresh set of eyes periodically reviewing how state and local taxes are managed. A fresh perspective nearly always results in significant savings. Understanding ever changing state tax laws, agency practices and rulings are essential. But, it's only decades of practical experience in multiple states, jurisdictions and industries that allow our professionals to identify and implement proven tax-reducing strategies. Madison Cooke has a proven 30-year track record of creating substantial state and local tax savings for our clients.

What sets Madison Cooke apart?

Focus – State and local tax isn't just our expertise – it's all we do.

Practical experience – We bring decades of practical experience with state and local sales, use, B&O and personal property tax. Our practical experience involves auditing, accounting, finance, law, and tax administration. Our associates include former senior auditors of the Washington Department of Revenue in addition to former tax managers and tax administrators for manufacturing and high-tech companies. We've been in your shoes and understand your business and concerns from an insider's point of view.

Comprehensive approach – We don't focus on the low hanging fruit. All Madison Cooke's resources are applied to a thorough and complete review and analysis. Our experience, at many levels and in many industries, has beneficial cross-over effects that other firms can't match.

Forensic analysis – We are state and local “tax detectives.” Getting results requires both “art and science.” Consequently the professional associate who does the review and analysis has to be the same person who knows the law and theory, not a junior associate.

Proven results – In 95% of our reviews we have identified and successfully recovered tax dollars for our clients.

Follow up – Comprehensive training is provided after a successful review. We make sure you understand and implement the tax reduction strategies we identify.

Value – Our commitment is to deliver a service that is dramatically more valuable than the fee we earn.

How much of the client's time is normally required?

Madison Cooke's experience means we not only find more “misplaced tax,” it also means you and your staff will spend less time involved in the process. We start any review with a preliminary analysis. That analysis begins with a one-hour meeting to get acquainted with you and your staff and get a feel for your company's systems. After the meeting we spend an additional 2 to 4 hours (depending on the size and complexity of your company) independently reviewing the records we previously requested. When we are finished we go back to our office to continue our analysis. If the preliminary analysis indicates a reason to proceed we will communicate a plan for the completion of the review.

If refund issues are discovered Madison Cooke handles all aspects of processing refund claims. That includes scheduling of refund claims, presentation of refund claims to vendors or governmental entities, managing of refund audits, refund negotiation, and any other actions necessary to ensure the refund is received.

What types of issues typically arise in a review?

No two reviews are exactly alike but there are common themes.

Misunderstanding a particular credit, exemption or program:

  • Research & Development in non-traditional high tech and non-high tech taxpayers – In other words a client may have an engineering department whose activity falls under the statutory definition of “Research & Development.” R&D activity carries significant sales/use/B&O tax advantages.

  • Availability and scope of tax deferrals – Similarly, identifying eligibility for a deferral has significant tax advantages.

  • Availability and scope of exemptions – Similarly, identifying eligibility for an exemption has significant tax advantages.

Misunderstanding key elements of the taxpayer's business:

  • Tax decision makers and administrators often lack all the information necessary to classify the revenue stream correctly for B&O tax purposes.

  • How the purchased item is to be used by the taxpayer is more important than the nature of the purchased item. Taxpayers typically look at what is being purchased to determine taxability. Additionally, the tax decision maker usually does not have the information necessary.

  • Often the tax decision makers are not fully informed on what does and does not go into a particular product or how the product is produced. As a consequence items that are ingredients may wind up treated as supplies.

Accounting systems are NOT built for excise tax:

  • The use issue described above is often manifested in the accounting system. In other words, tax decisions are made by reference to “taxable” and “non-taxable” accounts which reflect the type of purchase rather than the intended use of a particular purpose.

  • Simple errors in charging purchases to the wrong account can result in significant overpayments. For instance a common error is inventory purchases coded to a supplies account.

  • Products and revenue accounts and classifications are often driven by other business issues (i.e. marketing or sales) and do not provide accurate information for excise tax reporting.

DOR audits & advice:

  • The DOR is required by statute and inclination to be conservative. Asking the DOR their opinion seldom results in an answer that gives the taxpayer the best result.

  • Excise tax is fact based. The way a question is phrased and the word/terms used are critical in getting the best response.

  • DOR audits, in theory, rely on statistical analysis. Taxpayers face two problems. First, they usually lack in house statistical expertise. Second, they are not aware of how the data provided for the audit can cause serious flaws in audit accuracy – “Garbage In, Garbage Out.”

  • Taxpayers don’t have the knowledge or the contacts to resolve difficult issues without going to an administrative appeal.

How successful is Madison Cooke?

  • We recover better than 85% of claims filed on behalf of our clients.

  • When engaged by a client to handle a DOR Audit (from the beginning) the client has always received a refund.

  • When engaged by a client to review a DOR audit, on average, for every $1 assessed by the auditor, we obtained $3 of credits. In only two cases did the client owe the state tax and then it was less then $50,000.

  • When engaged to follow another excise tax consultant we have always found at least 50% more in additional tax credits.

How does Madison Cooke get paid?

Our clients pay nothing if we don't produce tangible, satisfactory results. Because most of our work involves a review, most of our clients pay us based on our performance – no refund, no fee. We determine our fee in one of three ways:

Performance – Performance fees (contingency) are based on a percentage of the tax savings and/or refunds achieved through Madison Cooke's efforts. No savings or refunds – no fee. The percentage and time period covered are agreed to before any work begins.

Project/Hourly – Project/hourly fees are based on the estimated amount of time necessary to complete a specific project multiplied by Madison Cooke's hourly rates.

Hybrid – A combination of a performance and project/hourly fees often makes sense; particularly for certain types of work and certain types of clients. As with everything else, flexibility is important.

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