California and the direct sales industry (6015b retailers)

For over seven years I had the opportunity to work in the direct sales/network marketing industry as a Sales & Use Tax Manager. When I started with the company, it was six months old, had done over six million dollars in domestic revenues and was registered for sales and use tax in one state and had filed one return, even though the company had been collecting in most states at the time. By the time I left in 2004, it was a worldwide company doing over $450 million in revenue.

In some states, it had  been determined that the company’s primary product was non-taxable/exempt (a 100% juice drink marketed as a dietary supplement), in others it was clearly taxable. My charge was two fold. File returns for moneys we had collected and get registered in those states where it was determined that we had nexus. Ultimately we ended up filing in all states but Montana, Oregon, Delaware and New Hampshire.

Also to continue the process of product taxability determination. This was done primarily through talking to State Revenue Departments and following up with a letter and copy of the product label and awaiting a response on whether or not our product was taxable.

As is common in that industry, product was taxed on the MSRP rather than what the company’s independent distributors actually paid for it, which at the time was a difference of $10/1 liter bottle; $40/case of 4 bottles.  Part of the reasoning behind this was industry practice and part due to a statute California had passed at some time in the past, which upon further reading appeared to be directed directly at the direct sales industry. This is Section 6015b of the Revenue and Taxation Code. That in part reads as follows:

Revenue and Taxation Code section 6015(b) provides that the Board, for the efficient administration of the sales and use tax laws, may regard any salespersons, representatives, peddlers, or canvassers as the agents of the dealers, distributors, supervisors, or employers under whom they operate or from whom they obtain the tangible personal property sold by them, irrespective on whose behalf they are making the sales, and may regard the dealers, distributors, supervisors, or employers as the retailer. Someone from our local Board office will contact you to determine if your company should be treated as a “section 6015 retailer.” If so, you will be notified in writing by the Board that your company is a section 6015 retailer. After notification from the Board, your company becomes the retailer of all the sales made by its distributors and must report and pay tax on the sales price charged by the distributors.

(Annotation 295.1508 letter dated 1/20/93)

The company had nexus on a couple of different fronts. 1) We used a third party manufacturing firm located in California to bottle our product, so the raw product came in from its source overseas (usually by boat, but sometimes by air) to the third party vendor where it sat until processed/bottled upon which time it was sent to our distribution facility in Utah. 2) Independent distributors, which under Scripto v. Carson would give the company nexus. (many more than the ten that Scripto had in Georgia in that case)

At a future point in time, we received a letter from the Board of Equalization notifying us that yes we were considered a 6015b retailer and had to comply with its provisions.  Our exposure in California at the time was in the low six figures per month. (>$1,200,000 annually) Fortunately we had no employees or offices as it made our audit a lot smoother. (no additional assessment for errors or use tax)


Choose the right tool

There are a variety of methods and tools to keep track of our lives, both through to do lists, journaling products and future planning. Whether that is tomorrow, next week, next month, next year or even ten years from now.  The following came was a response to a posting by Amber Mac on The title of that posting was Work Smart: 5 Easy To-Dos That Keep Your To-Do List Healthy. I was linked to it from which is a blog I have been reading since early 2008, and that is where I made my posting, which I liked so much I kept a copy.

Amber was talking both about a specific product to help manage your to do list as well as in general.  Tuex Duex is the name of that product. I have not used it so I won’t be talking about it specifically or any other electronic product whether that was designed as a web, desktop platform or a smart phone platform. Be aware they are available.

There are also a variety of paper solutions available.  I have tried three. Day Timer and Franklin, and in between I tried something else which I don’t remember what it was. It was not something that worked for me. At the time I used it and in the format I used it the Day Timer system worked for my needs at that time. I still use the Franklin system as it continues to work for me.

If you have determined that you need to use something but don’t know where to turn because of all the choices, this is to give you some ideas of what some people have had success with and my opinions on the following topics:

  1. Choosing the right tool. – This might be the most important. If the tool doesn’t suit the user it won’t get used. And isn’t that the point? My choice of tool is the FranklinCovey planner system. I have been using it since 1986. Yes, I still use paper and pen in this electronic age. (my favorite pen is a fountain pen) Mine is what they call the “Classic” size – pages are 5.5” x 8.5”.  One of the great things about the Franklin system is that it can be used as a journal and note taking system as well. I have all of mine clear back to when I first started using it for this express purpose.   Someone else might find that a software solution works for them best.  Some people might find something as simple as a Moleskine notebook and pen work for them.
  2. Be in the now. – I disagree with some of what Amber says under this heading. (for detail go to her post) Except this is how I would put it: Worry about what you can control. The only period of time that you have any control over is TODAY. Plan your day each and every day. Some people like to do it in the evening the day before, I like to do it first thing in the morning after arriving at the office; others do it at home (am or pm). Do what works for you.  I do agree with making it an actionable item.  I will speak more to the why later.
  3. Learn to delegate. – This is great; I do this as much as I reasonably can. Remember though, delegation is more than just dumping what you don’t want to do off on someone else. Why? Team members/co-workers figure out what you are doing real fast and then nothing happens. Since it was your responsibility to begin with guess who it falls back on? Not the co-worker. lists two different forms of delegate. Both noun and verb. Neither directly refers to what we commonly call delegation. But a synonym does (given context I assume it is for the verb form. That is entrust, assign, and transfer. The word delegation means “the act of delegating”. Well that tells us a lot doesn’t it?
  4. Prioritize & Reward. – Prioritization is Critical. I use a system that Franklin advocates/teaches. ABC – no need to go beyond C. Anything beyond C is a waste of time. Then go back through them again and number them A1, A2 etc, same with the B’s and then the C’s. Mini rewards (candy bar, soda, whatever) I have mixed feelings about. Of course A1 for me is always something I call “Planning & Solitude”. If I am going get a check mark for it, I am more likely to do it. When you finish the item, check it off. Feels great doesn’t it? That in itself is reward enough most of the time. Many days I will put an item in (almost always as an A) “Run” or “gym” – it helps motivate me to do it.  Make sure you don’t have too many A’s though. You don’t want to overwhelm yourself.  Rewards can include tangible things as well. Just don’t overload your day with them. You don’t want to have a ton of C’s either though and then do them all at the expense of the A’s and B’s. Typically they will be very easy to do, but not necessarily the most important items you have to do on a given day.
  5. Plan ahead (see #2) – This includes moving forward stuff that didn’t get finished today. The Franklin system uses a set of symbols. A dot for in process, an arrow for stuff that I am moving forward, an  X to delete the task, a circle with the letter of the first name of the person who is doing it for me (and as long as they are working on it gets a dot as well, and a checkmark when finished.

I.R.S. Moves to Tax Gifts to Groups Active in Politics –

I.R.S. Moves to Tax Gifts to Groups Active in Politics

Originally Published: May 12, 2011

Big donors like David H. Koch and George Soros could owe taxes on their millions of dollars in contributions to nonprofit advocacy groups that are playing an increasing role in American politics.

In 2009 and 2010, George Soros, the billionaire investor, donated more than $12 million to advocacy groups.
Americans for Prosperity, a libertarian group that opposes many of President Obama’s policies, has been generously financed by David H. Koch, a billionaire.

Invoking a provision that had rarely, if ever, been enforced, the Internal Revenue Service said it had sent letters to five donors, who were not identified, informing them that their contributions may be subject to gift taxes depending on whether the donations exceeded limits under the tax laws.

These advocacy groups have been drawing more scrutiny, from President Obama as well as others, as they have proliferated and funneled vast sums of money in support of campaigns and causes, without having to publicly disclose their donors.

During the midterm cycle, for example, groups like Crossroads GPS, which has ties to the Republican strategist Karl Rove, and Americans for Prosperity, backed by Mr. Koch and his brother Charles, were heavily involved in politicking, spurring campaign finance watchdogs to complain that they were flouting election and nonprofit laws.

Spokesmen for the Koch brothers and for Mr. Soros would not comment as to whether they had paid gift taxes on these types of donations, or whether they had received letters from the I.R.S.

These organizations were established as nonprofit corporations under a section of the tax law, 501(c)(4), and the rules governing them say their primary purpose cannot be political.

The timing of the agency’s moves, as the 2012 election cycle gets under way, is prompting some tax law and campaign finance experts to question whether the I.R.S. could be sending a signal in an effort to curtail big donations.

“There are a whole heck of a lot of people misusing (c)(4) groups as a means of getting around campaign finance regulations, and we lack a coherent system of laws to deal with that,” said Donald B. Tobin, a legal expert on campaign finance and tax laws at the Moritz College of Law at Ohio State University. “Now here’s a stick, frankly, that says there are consequences for doing that.”

In a statement released Thursday, Michelle L. Eldridge, a spokeswoman for the I.R.S., said that the inquiries were initiated by agency employees, not White House or other Obama administration officials, “as part of their increased efforts in the area of nonfiling of gift and estate tax returns.”

The letters informed donors that investigations had been opened to determine why a gift tax form had not been filed, and requested that donors submit records of all donations in the year 2008, according to a redacted copy obtained by The New York Times.

While tax lawyers who learned of the investigations have been issuing warnings to clients of potential trouble on a broader scale, the I.R.S. statement denied casting a wider net, “These examinations are not part of a broader effort looking at donations to 501(c)(4)’s.”

The White House would not comment. Some members of Congress have been asking the I.R.S. to investigate the tax-exempt status of these groups, too, although lawmakers have also cautioned that since the Nixon years, the agency has been strictly prohibited from what could be considered politically motivated inquiries.

Still, experts are sensing that the message being sent may deter large donations to these groups, at a time when big corporate, union and like-minded political contributions are expected to flood the election cycle through the barriers lifted by last year’s Supreme Court ruling in the Citizens United case.

Both major political parties and candidates have benefited from these types of organizations, but the Republican groups grew in force and size after the 2008 election, partly in recognition of Mr. Obama’s proficiency at fund-raising. For example, Mr. Rove’s group, one of the best known from the 2010 midterm cycle, raised $70 million. Americans for Prosperity, a libertarian group that is opposed to many of President Obama’s policies, has been generously financed by David Koch.

Democrats have embraced the model, too. Bill Burton, Mr. Obama’s former deputy press secretary, was skewered by critics of these groups for creating Priorities USA Action to help Democrats. In 2009 and 2010, Mr. Soros, the billionaire investor, donated more than $12 million to advocacy groups.

In general, individuals incur gift taxes of 35 percent on any amount exceeding $13,000 in a year, with a limit for couples of $26,000. A lifetime exemption covers $5 million in gifts — to be reduced to $1 million in 2013 — but experts say many wealthy donors are likely to have used that in their estate plans.

The I.R.S. definitively declared these gifts taxable in 1982. “That was their last word on it, so these letters just look like a sort of trap for the unwary, which is not fair,” said Ofer Lion, a lawyer who has written about the issue.

In December, after the 2010 midterm elections, officials with the I.R.S. division that oversees tax-exempt organizations indicated it would pay closer attention.

But at a meeting of an American Bar Association subcommittee last Friday, they were surprised to learn that their colleagues in the estate and gift tax unit also had an increased interest, according to lawyers who were there.

“I don’t know how extensive this effort is, but I have one such client and I’ve spoken with others with clients who have received similar letters,” said Gregory L. Colvin, a lawyer specializing in nonprofit law.

Other groups rarely receive donations big enough to incur the gift tax, which is why many of them have established affiliated charities. Charities, unlike almost all other tax-exempt organizations, offer their donors a tax deduction and so attract large gifts.

Big donations to the largely unregulated 527 groups that were influential in the 2004 election cycle are not subject to the gift tax. “Congress specifically exempted donors to 527 organizations from the gift tax in 2000, but it didn’t exempt contributions to (c)(4) groups because there wasn’t an issue at the time,” said Alan P. Dye, a lawyer who represents a number of conservative advocacy groups. Now that the Citizens United case permits big donors like corporations and unions to spend money in elections, Mr. Dye added, “I think it’s going to be really interesting to see how this plays out in Congress or the courts.”

In the meantime, Marcus S. Owens, a lawyer who represents nonprofits and who formerly headed the I.R.S. division that oversees tax-exempt organizations, predicted that the tax agency’s moves would be watched warily by contributors. “The lack of clarity and the potential for not-insignificant taxation on these gifts will cause many of the biggest donors to think twice,” he warned.

A version of this article appeared in print on May 13, 2011, on page A1 of the New York edition with the headline: I.R.S. Sets Sights On Donors’ Gifts That Push Policy.

Don’t Let Anybody Steal Your Dream…..

This is a poem I wrote in October 1979. I thought I would share it. The original was written in a journal I was keeping at the time.

Don’t Let Anybody Steal Your Dream

Don’t let anybody steal your dream,

whatever it may be, and you will see,

That that dream can be reality.

So if you work hard and don’t lose that dream,

Then it will become a reality.

But don’t forget once again,

Don’t let anybody steal your dream.

For if you do you will be surely sorry,

For it is quite difficult to get back.


Amazon could cut ties in more states over tax dispute | Reuters

Last Wednesday at the ShopSmart Shopping Summit in New York, Amazon CEO Jeff Bezos spoke about the proliferation of so called Amazon Laws, and what the company’s actions might be in the future regarding such laws as it relates to its affiliate program. The following is the Reuters article in its entirety.

By Dhanya Skariachan

NEW YORK | Wed May 11, 2011 5:13pm EDT

Reuters – could cut its partnership with affiliates in more U.S. states that require the online retailer to collect sales tax, Chief Executive Jeff Bezos said on Wednesday.

The comments from the world’s largest online retailer come less than a month after brick-and-mortar rival Best Buy expressed optimism about potential online taxation reforms that would expand the collection of sales taxes on items bought over the Internet. Many traditional chains such as Best Buy and Sears have openly voiced their concerns about online-only retailers like Amazon getting an unfair advantage by not having to collect sales tax in states where it does not have a corporate presence. Lawmakers in states — many facing huge budget deficits — have also argued that Amazon has a duty to collect tax because its “affiliates,” or independent Web operators which are paid a fee when they drive traffic to Amazon that results in a sale, operate in the state. Amazon has already announced plans to cancel its affiliate program in Illinois in response to the state’s new law to target online retailers that have affiliates in the state.Texas is considering taxing online sales and California, which already passed legislation that was vetoed, is considering another bill. Last October, Amazon also got a $269 million bill for uncollected sales taxes from the state of Texas.”We will continue to drop states who pass those affiliate laws, from the affiliate program,” Bezos said at the ShopSmart Shopping Summit in New York on Wednesday.”In the U.S., the constitution prohibits states from interfering in interstate commerce,” Bezos said, citing a U.S. Supreme Court case decades ago that clarified that “mail order” companies could not be required to collect sales tax in states where they did not have “nexus.”Bezos said the issue highlighted the need to simplify the existing sales tax system.”The sales tax collection is very complicated,” Bezos said. “The right place to fix this is with federal legislation.

via Amazon could cut ties in more states over tax dispute | Reuters.

Pruning the Time Wasters

In my last post I mentioned Peter F. Drucker’s four diagnostic questions that deal primarily with unproductive and time-consuming activities over which every executive (to use Drucker’s term but which refers to any knowledge worker for the purpose of this conversation) should ask. Today, we will go into greater detail on each one.

  1. Identify time wasters which follow from lack of system or foresight. Symptom: Crisis, especially recurrent crisis.

An example: A company that makes an earnings prediction for year end when releasing the second quarter’s interim report earlier in the year – during the fourth quarter, there is much scurrying about in order to meet management’s forecast. This lasts from three to five weeks with the end results of no one in the management group getting any real work done. A solution is needed in order to satisfy the needs of the various stakeholders. The final solution?  Instead of predicting a definite year end number, management starts to predict within a range. This satisfies the financial community, shareholders, and directors and the executive team’s time is now more productive.

  1. Time-wastes often result from overstaffing.

A work force may be too small to get the work done. But oftentimes, the workforce is too large to be effective. This is a workforce that spends an increasing amount of time “interacting” rather than actually doing productive work. A symptom of an overstaffed situation? A manager that spends more than about 10% of their time dealing with “problems of human relations” has a workforce that is too large. Oftentimes the excuse heard is “we have to have x specialty on staff”, even if that persons specialty is not something that is used on a day to day basis. In that case, the company is better off to use outside fee based consultants.

  1.  Another common time-waster is malorganization. Its symptom is an excess of meetings.

Meetings by definition are a concession to deficient organization. You either meet or you work – you cannot do both at the same time. In a perfect world/organization (which is impossible by the way) there would be no need for meetings. Meetings are held because people holding different kinds of jobs have to cooperate with one another to get specific tasks/projects done. All the knowledge, experience and expertise are not available in one person, but have to be pieced together from the knowledge and experience of several people. But if executives in an organization spend more than a small part of their time in meetings, it is a sure sign of malorganization.

  1. The last major time-waster is malfunction in information.

One example is a large hospital whose admissions people “know” there are no beds available, yet when a doctor calls the administrator a bed is nearly always found. For whatever reason, the admissions department is not informed immediately when a patient is discharged. The floor nurse knows, the billing office knows but not admissions.  The first question is why? Which is related to the fix: An extra copy of the document that goes from the nurse to the billing office also goes to admissions.

Another example is in a manufacturing organization when the production people get the information they need in the wrong form. Operating people need extremes and ranges, for product mix and other related items while the financial people need averages. So this information has to be translated from the information accounting needs and uses to the type of information that production needs. Accounting has all the information but just needs to know what production needs to give it to them.

Now this seems like it is more organization focused, and it is. But the same basic procedures can be applied by an individual.

Doest thou love life? Then do not squander time. Time is the stuff life is made of.

Doest thou love life? Then do not squander time. Time is the stuff life is made of.”   –   Benjamin Franklin

According to Peter F. Drucker, in his book The Effective Executive he goes as far as to use the language of economists when talking about time.  “The supply of time is totally inelastic. No matter how high the demand, the supply will not go up. There is no price for it and no marginal utility curve for it. Moreover, time is totally perishable and cannot be stored. Yesterday’s time is gone forever and will never come back. Time is therefore, always in exceedingly short supply.” How short a supply? There is none shorter – it is totally irreplaceable.

That being said, we all know people who are very good at making the most of their time and get a lot done, and we all know people who are constantly pressured by time and seem to get very little of importance done. What is the difference? Is there a secret to it? Yes, there is a difference, however subtle.  The difference is in how well we understand and use the precious resource that we call time. So precious in fact it has been called irreplaceable. The thing we call time management is a skill that each one of us has to learn and apply in order to take advantage of that resource.

Again, according to Drucker, time is in short supply – 24 hours in a day, 168 hours in a week and once those hours are gone they are gone forever.  One definition of time is this: time is merely the order of events, not an entity itself.   To take this a step further we have to know what an event is. One definition is simply a happening or occurrence of something. It can be virtually anything. Simple or complex.

Knowing this information, the thing we call time management could be simply called “Event Control”. Drucker also teaches us that the task of the time manager is to control time where he can. Control is the key to personal productively or time management.

What does this all mean?

At the most basic level, we must all realize that we must be proactive in order to achieve control over our lives as it relates to the events that make up our lives. Our other option?  Be reactive ­­- to let others act upon us and determine what we will accomplish, to be controlled, instead of in control.

In other words, we need to learn how to do something that Drucker called “Pruning the Time Wasters”. This consists of four simple diagnostic questions that deal primarily with unproductive and time-consuming activities over which every executive (to use Drucker’s term but refers to any knowledge worker for the purpose of this conversation) should ask. Managers, however, need to be equally concerned with time-loss that results from poor management and bad organization. Poor management wastes everyone’s time- but above all it wastes the time of the manager.

  1. Identify time wasters which follow from lack of system or foresight. Symptom: Crisis
  2. Time-wastes often result from overstaffing.
  3.  Another common time-waster is malorganization. Its symptom is an excess of meetings.
  4. The last major time-waster is malfunction in information.

Answer these questions and you will make great inroads to becoming the person who we talked about – the one that is good at making the most of his/her time.

In my next post, I will talk more in detail about these four questions.

Sales & Use Tax – a Q and A – affiliates and the Amazon Law

Q: What is an affiliate?

A:  In a business context, there are two general definitions. The first and one that for the present discussion I am not going to be as concerned with is a company that is related to another company, oftentimes as a subsidiary or “sister” company.

For this discussion, we will be more concerned about the second as it is common in the online marketing world. In this context, affiliate has more often been used to denote a business arrangement between two companies in which one (the affiliate) is paid a cut of a sale by the seller in exchange for putting advertisements or links for a product on his or her website. (Two companies with large affiliate programs are and

Q: I have heard something about a court case involving and and the State of New York. What is that about?

A: In 2008, the state of New York in an attempt to bolster sales tax collections, primarily from out of state companies like Amazon and Overstock, by essentially doing an “end run” around the Commerce Clause of the US Constitution (which gives the U. S. Congress sole power to regulate interstate commerce and prohibits certain state actions, such as applying duties (taxes), that interfere with trade among the states),  by instituting a law that says that if a company has affiliates that put a link on a website to the seller’s website and that link generates more than $10,000 in sales for the seller during the four previous calendar quarters ending February, May, August and November that a “substantial nexus” is created and therefore the seller must register and collect.

This is believed by many (including this author) to be in violation of the Commerce Clause and the US Supreme Court decision Quill Corp. v. North Dakota, where Quill, a mail order seller of office supplies and equipment had no employees or offices in the state and shipped using the US Postal Service and common carrier, had only a few floppy disks of a licensed software program in the state so customers could check inventory and order essentially “online”. Something the US Supreme Court called “insignificant or non-existent“. The state of North Dakota attempted to impose a use tax collection responsibility on Quill, which was deemed unconstitutional by the court. The court in Quill said that a state cannot require this collection unless it has “substantial nexus” with the taxing state which Quill did not have.

The Amazon LLC and, Inc. v. Dept of Taxation cases are still in the court system with the law having been upheld by the New York Appellate Court, and could ultimately end up in front of the U.S. Supreme Court. In recent similar cases, the court has chosen not to hear those cases. In recent months, several other states have instituted similar laws. In all states that have, both companies have discontinued their affiliate programs.

Share your thoughts on this topic with me.

Sales Tax Nexus – a Q and A

Today’s post is a little different than the last one – partly in format as well as topic. It will also be part of a series.  I decided to address a topic that is something many small business owners have questions about. That doesn’t mean it isn’t relevant to larger businesses as well though. In some cases, it is the larger small business to medium sized business that may have the most issues with it.   Nexus, particularly for Sales Tax is the topic I want to discuss today. I have set it up in a Question/Answer format with questions that are frequently asked by small business owners.

Q: What is Nexus and why as a small business owner should I care?

A: In its simplest terms, Nexus when applied to business means that the business has a presence within the state that would require the business to pay income tax and collect and remit sales and use tax as well as other taxes. Another way to say it would be that nexus describes a level of business activity within a state. That level varies from state to state and even tax to tax to some degree. This article will talk about two taxes primarily. The sales tax and the income tax.

Q: How I do I know if I have nexus and can I have nexus for sales tax & not income tax?

A:  Nexus determination is somewhat different for income tax and sales tax.

For Income tax, in general, nexus is created if the entity derives income from sources within the state, owns or leases property in the state, employs personnel in activities that exceed the level of “mere solicitation”, or has capital or property in the state. These requirements will vary from state to state.

For Sales tax nexus is defined more loosely. Some examples of things that will trigger nexus for sales tax are:  A physical location within the state; resident employees and in some cases this extends to independent contractors as well. (see US Supreme Court: Scripto, Inc. v. Carson: S.Ct. 362 U.S. 207 (1960)); if the business has property (including intangible assets such as Trademarks, Copyrights, and Patents) and employees who regularly solicit within the state.

In the past, a physical presence has been required.  Over the last few years however, nexus has also been invoked in relation to affiliates. (we will talk more about affiliates at another time) Overall, the issue of nexus is very complex and can change with the facts of each case.

Q: I have heard of something called Use tax. What is it and how do I know if I owe it?

A: The use tax is a complimentary tax to the sales tax. In terms of rate, it is usually but not always the same rate as the Sales tax. It is assessed on items that are purchased “tax free” such as mail order and internet purchases that cross state lines where no sales tax is paid.

An example would be is if I am in Utah, buy something online from a company in Florida, I won’t pay sales tax unless that company has a physical presence in Utah that would require them to collect and remit the Utah tax. As the purchaser, I am liable for the tax and am supposed to report and remit the tax on my income tax return. If I live in the Salt Lake City area where the tax rate is 6.85%, that means that on a $1000 sale, I owe $68.50.

What is Ethical Behavior?

What is ethical behavior? Is it based in religion or is it based only in the secular world? Let’s look at some definitions from various sources and then go from there. defines ethics as:  a system of moral principles: the ethics of a culture. The rules of conduct recognized in respect to a particular class of human actions or a particular group, culture, profession etc.: medical ethics; Christian ethics, etc.

So according to the dictionary, ethics are not necessarily based in religion but can be based there. Certainly different faiths, whether one is Jewish, Christian or Islam or some other faith there are beliefs in moral principles that could be considered ethical behavior.

Black’s Law Dictionary defines ethics as “a consensus of expert opinion as to the necessity of professional standards.” They (Black’s) also defines ethics in terms of behavior and guidelines among the members of a profession/professional organization and their duties towards one another, clients and the public.

This would be a definition that we are all familiar with in our professional lives. But is there more to it than that? Let’s look at what others throughout history have said.

Aristotle defined ethics as “practical wisdom”. Why practical? Because it involves an action (behavior) – both at the individual and societal/corporate level.  Aristotle also believed that ethics related to what should or should not be done with regard to the things are good or bad for an individual. He also said “we are not studying in order to know what virtue is, but to become good, for otherwise there would be no profit in it.” In other words, we have to “practice” it for lack of a better term. It requires action on our part.

What comes to your mind when you hear the word or think of ‘ethics’? Is it a just list of rules that one must follow in ones professional life? Is it a set of principles – moral or otherwise that you believe in? Is it being fair and honest with others, either personally or professionally? Is it simply following the letter of the law? Does doing that make one ethical? In my opinion, one can be within the law and not act ethically.  Does/should your personal definition of ethics go beyond that just acting within the law? I think it is a combination of all of these and more.

To use a term that is often used in the tax and legal worlds, is there a bright line test that one can use to determine what is and is not acceptable ethical behavior? Do words like integrity, moral obligation, individual and corporate responsibility, truth come to your mind when you think of ethics?  Do ethics apply at the individual level only? In addition to its application to individuals, does it apply to organizations and groups such as cultures, societies, professions, corporations, among others?

Many professional organizations postulate ethical codes for their members – professional journalists, CPA’s, Attorneys, Engineers, Medical Professionals, Human Resources professionals to name just a few that I found. Other examples are government related. Two examples of these are a Taxpayer Bill of Rights and Fairness in Tax Administration. Still another is one that is one that members of Federal, State and Local legislative bodies must follow.

Many companies (including governments) have what could be considered ethical codes, which are typically called a “Code of Conduct” for their employees.

The Institute for Professionals in Taxation (IPT) has established the following Code of Ethics to govern the conduct of its members in connection with the performance of their professional duties as tax professionals and as members of IPT.

As tax professionals, the members of IPT have an obligation for the competence and integrity of their work and conduct.

Each member of IPT is bound by this Code of Ethics and agrees to report to the Committee on Professional Ethics any violation of the Code known to such member.

An IPT member having supervisory responsibility for other tax professionals should make those subordinates aware of this Code of Ethics and instruct them to adhere to its provisions.

The Committee on Professional Ethics, and in the event of an appeal, the Board of Governors, interprets the provisions of this Code in rendering opinions and in conducting investigations and hearings pursuant to regulations and procedures established by the Board.


  1. IT IS UNETHICAL to engage in any conduct that discredits IPT, its membership, or the tax profession.
  2. IT IS UNETHICAL to engage in any activity that results in a conviction of any crime committed in connection with the member’s involvement in a tax matter.
  3. IT IS UNETHICAL to operate beyond the boundaries of an agreed relationship with an employer or client.
  4. IT IS UNETHICAL for a member of IPT to state or imply that such member represents a person that the member does not represent, or to file any document on behalf of such person without authorization.
  5. IT IS UNETHICAL to disclose confidential employer or client documents or information except with the consent of the employer or client or as required by law.
  6. IT IS UNETHICAL to offer or give anything of value to a public official to induce that official to take any action with respect to a tax matter.
  7. IT IS UNETHICAL to offer or give anything of material value to an individual in an employment, advisory or representative relationship with a business to induce that individual to recommend the purchase of goods or services by the business, and IT IS UNETHICAL for such individuals to receive such value.
  8. IT IS UNETHICAL to pay, retain, or accept a share of a fee or other monetary compensation for the referral of a person to another for the provision of tax services in which the recipient of such compensation does not participate, unless advance notice is given to the person for whom such services are to be performed. The amount of the compensation for the referral need not be disclosed unless requested by the person for whom the services are to be performed.
  9. IT IS UNETHICAL to solicit a tax assignment by assuring a specific result or to solicit, assign, accept or perform a tax assignment that is conditioned upon producing a preconceived opinion or conclusion.
  10. IT IS UNETHICAL to initiate or pursue an appeal, protest, refund claim or other action on behalf of a taxpayer for which there is known to be no basis in fact or law. When the basis is unknown, the determination of whether a basis in fact or law exists must be made as soon as reasonably possible.
  11. IT IS UNETHICAL for a member, in the performance of a tax assignment, to fail to exercise independent judgment in advising and representing a client.
  12. IT IS UNETHICAL in the performance of a tax assignment to knowingly furnish or knowingly rely upon inaccurate, deceitful or misleading information, or to knowingly withhold information which lawfully should be revealed.
  13. IT IS UNETHICAL to prepare or use in any manner, for any purpose, a resume or statement of professional qualifications that is misleading or false.
  14. IT IS UNETHICAL in promoting a tax practice or soliciting tax assignments to make misleading or false representations.
  15. IT IS UNETHICAL to use client listings or references without specific authorization.
  16. IT IS UNETHICAL to state or imply IPT authorization, endorsement or approval of any business, product or service.
  17. IT IS UNETHICAL in any representation of fact to IPT, in a membership application, renewal form, or otherwise, to knowingly furnish inaccurate, deceitful, or misleading information, or to knowingly withhold material information.
  18. IT IS UNETHICAL for a member having supervisory responsibility for another tax professional to knowingly authorize, direct, permit or ratify any subordinate’s act or omission that is declared unethical by this Code, regardless whether the subordinate is a member of IPT.
  19. IT IS UNETHICAL to represent a client if such representation would be, or would risk being, adverse to the interests of another client unless each affected client gives informed written consent to such representation
  20. IT IS UNETHICAL to have, acquire, or seek a personal interest in a matter that is adverse to the interests of a client or employer.

[The above was adopted by the Board of Governors on September 28, 1976, and amended on April 28, 1991, November 9, 2002, March 6, 2004, and November 2, 2008 (the November 2, 2008 changes became effective January 1, 2009).]

I recently had the opportunity to be a judge for the Utah State Competition for FBLA/PBL. (business students – high school and college respectively)

The topic?  Business Ethics and Social Media.

How does all this relate to Social Media? (Facebook, Twitter, LinkedIn, and other social media – including blogs like this one) Do we treat present day social media differently than media of the past (print & broadcast)? If so, what rule changes do we make? What is Ethical Behavior in that context? I don’t have any better handle on it than I did before that day.

What is your opinion on what is and is not ethical behavior? Any and all comments are welcome, I would love to hear your viewpoints.