[IMGCAP(1)]It used to be relatively simple to advise retail businesses on tax laws.
The accountant would consider the applicable federal, state, and local taxes and work with the retailer to establish business practices that ensure they are taxed fairly and appropriately, but not more than necessary.
The proliferation of drop-ship companies has made tax considerations for retail businesses much more complex. It creates a challenging tax situation when items are not sent from the retailer’s location, but are sent directly from a manufacturer or distributor having business in the same state as the customer.
Even retailers that only use drop shipping when they do not have a specific item in stock are affected by drop ship tax considerations. Tax laws in these situations are extremely complicated and can vary in each state. Accounting professionals who advise retailers on these issues may have a sophisticated understanding of the tax nuances, but knowledge of these tax laws is not enough to work successfully with retail businesses.
The day-to-day decisions about how to process orders is usually made by members of the retail company’s accounts payable processing team, and these professionals rarely have this same level of tax knowledge as a qualified CPA or tax expert. Few accounting firms truly comprehend the challenge of training these accounts payable employees. Once a CPA understands the extent of the challenge, fewer still have truly mastered the art of running a successful training program for the order processers.
It’s a new and challenging tax world for retailers. There are virtually unlimited opportunities for CPAs who are able to implement successful training programs: Will your firm be the one who makes it happen?
Here are the areas where a CPA firm could be most useful to retail companies:
Item 1- Clarity: Accounts payable employees undergo several training events related to this topic, and the feedback from employees is that the sessions are at best beguiling, and at worst tiresome and useless. It’s always amazing to watch the communication breakdown during a training session. Why do these sessions invariably fail? I believe it’s largely because the accounting professionals who run these sessions do not have a strong sense of who their audience is. They speak to the accounts payable processors as if they are talking to a group of accounting peers, but it is worth remembering that the individuals who handle the day-to-day decisions about tax laws do not know have the same tax knowledge as a retail tax expert.
Item 2- Ask questions: Aside from incomprehensible training events, the other gripe that AP employees have with these trainings is that the information doesn’t seem to apply to their business challenges. The tax expert shares the information with template examples and generic case studies, but the examples do not represent the challenges that we regularly encounter. If specific problems that they face regularly are not addressed in a clear and organized manner, then they are no better off than they were before the training session. Here’s an exercise: if you have a presentation with employees, pretend you’re a highly paid consultant and you’re trying to win the business of a new client. What would you do? You would ask a lot of questions. Ideally, you would ask them before the meeting to email you samples of cases that are the most persistent problems. Do exactly that. Make sure you understand the tax challenges of the employees, and give a presentation that solves their unique problems. It is impossible to overstate how effective this approach will be, compared to simply instructing the team based on the generic examples that you prepare without talking to the group.
Item 3- Be a psychologist: These presentations to employees run the risk of making the staff feel like they are being admonished for not handling tax issues correctly. There is an interesting psychology that takes place here: when employees feel like they are being reproached, this causes them to “zone out” and they will not hear the advice that you present, not matter how beneficial your information may be. Instead, make it abundantly clear that they were not expected to know this information and they could not have known it until now. You can even present the information as “new tax updates.”
Item 4- Accessibility: Your schedule does not allow you to conduct a one-on-one tutorial session with each order processer in the AP department, but making an effort to be accessible to the team will endear you to a retailer. When you can’t provide face time, find other ways to meet their needs. For example, you can extend an offer to speak with the retailer’s accounts payable department, and then use the questions that they pose to create a written FAQ page. Send this to the retailer’s CFO and their accounts payable controller. Then send them an email every other month to see if there has been progress in meeting the drop ship challenges. If the issue has not been resolved, offer to help.
A final thought: There are significant opportunities for accounting firms of all sizes to reach out to retailers. If you can help monitor the current operations of retail clients and suggest improvements in how drop ship orders are processed, you will solve a major pain point for retailers. You will stand out far ahead of your competition and I think you’ll be amazed how this strategy can help you to quickly grow a robust business of retail clients.
Montee Kaminetzky is accounts payable controller at B&H Photo Video in New York City.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access