General Counsel and State Tax Notices


General counsel often do not receive notices from tax agencies. These notices generally go to the financial officer's departments or to whomever handles taxes.

Notices from the Internal Revenue Service generally get attention, but notices from state or local agencies often get ignored because the amounts are small or the recipient does not think that the company has nexus (sufficient contacts) in the state to be subject to tax.

However, many states, including California, are changing their nexus rules and are becoming more aggressive in issuing assessments when ignored. Assessments left to go final can generally be challenged only after payment of tax and they may result in liens on property. Companies subject to reporting in accordance with FIN 48 and FAS 5 may also have to reconsider positions with the new rules. These new rules may also affect document retention practice.

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Sheppard Mullin Richter & Hampton LLP on:

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