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“Words Have Meaning — Especially Statutory Words”



By Michael J. Fleming

One of my mentors constantly reminds me that, “We are accountants; words have meaning.” My immediate response is to usually think that, “if we were not accountants would words not have meaning?” However, once I get past my sarcastic thoughts, I realize that he is challenging us to be more precise and succinct in our writing and to not just read surface meanings but to really analyze the words for alternative meanings. Looking for alternative meanings is especially important when it comes to state tax audit defense. Since you can’t change the facts, you sometimes have to change the argument.

This concept was illustrated quite pointedly in the recent decision of Van Horn v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Division, No. S. 12-863, January 3, 2013. In this case, the taxpayer or his employees traveled throughout AL to take photographs which were later developed at the home office and sent to customers by common carrier. The taxpayer also made in-person phone calls. The DOR examiner assessed the taxpayer for the local taxes based on the sales and photographing visits. The administrative law judge agreed that it could be argued that the taxpayer had purposely availed himself of the economic market and met the conditions of Quill. However, Quill did not apply because the DOR had not updated its regulations concerning local nexus. Basically the only activity that mattered was solicitation and the taxpayer actually traveled into four jurisdictions to solicit sales. However the Administrative Law Judge (ALJ) found that this was still not enough to create nexus. His reasoning was that the statute read “salesmen” while in the taxpayer’s case there was only one “salesman”. He clarified that since the state only used the plural form, the regulation anticipated multiple sales people and therefore the taxpayer did not have nexus.

Words have meaning! In this case the state failed to update its language to be more encompassing and capture the implications of Quill as well as using only the plural form of a word. What great illustrations! We don’t suggest taking this approach when doing tax planning but when you find yourself in an audit situation having someone who can think outside the box is invaluable. My mentor constantly forces us to do so.