The 5 Keys to Saving Time and Money on Tax Research

Every government has their own unique laws governing sales and use taxes, so keeping on top of your sales tax rules and requirements on a state-by-state basis is a daunting task, even for seasoned sales tax professionals. 

Conducting tax research is frequently handled by less senior employees in the tax department. Does this sound like you? You might have not received proper training on the nuances of sales tax resources and research. And this can lead to bigger, more costly problems than you might imagine. 

First, without knowing how to properly research sales tax statutes and regulations, you may be finding wrong or incomplete answers and providing management with incorrect information. This can lead to problems come audit time. Second, if employees are conducting tax research in an unorganized, haphazard fashion, chances are they are spending way too much time finding answers, which is also a money leak. 

This is to say that a bit of expert advice and training can go a long way towards saving your company time and money on tax research down the line. As your go-to sales tax training resource, we’ve come up with a systematic approach for you to find the correct answers to sales tax questions in less time.  

Doing sales tax research the right way involves a set of 5 chronological steps. Here’s how to do it: 

1. Identify all the Taxability Scenarios

Your first step is to identify what your question is and to be specific about each of the taxability scenarios you need to evaluate. If a large number of cases are being evaluated, it may be helpful to organize them into groups that have the same facts or are in the same category. Be sure to include all details that could affect the taxability of the transaction. Make sure to use any existing knowledge, including prior research projects you or your team have conducted, as a starting point for researching the new scenarios. You’ll also want to gather a list of ideas or keywords that can be used in the research – think of every variation you can so you have better results with your search.  

For example, if you need to know the taxability of software maintenance contracts you need to break it down into canned or custom, mandatory or optional, tangible or electronic delivery, bundled or separate, and even what type of application and whether any other exemptions might apply. 

2. Begin the Research

Now that you know what you have to find the answer to, you can start your research. The next step is to identify the research tool that you’re going to use. Do you have access to a commercial (paid) tax research tool? Or do you need to rely on free tax research resources? If you have access to a paid tool, the ease of use and reliability of the information can be invaluable. 

You’ll also want to evaluate how many different taxing jurisdictions are involved in your research. And you’ll want to determine how standard the issue is that you’re researching. For instance, are there unique items that can change the taxability determination? 

When you are researching you also need to determine what types of sources you want to include.  Are you looking for the law or cases or maybe specialists’ interpretation on the matter?  If you are looking for the law – then be sure you are researching the law – the actual statutes passed by the legislature.  Regulations are the Department of Revenue’s interpretation and commentary, while other articles are people’s interpretations.  

It can be useful to start with informal guidance and follow the citations up the ladder of sources. For example, if you find a California guidance publication on your issue that doesn’t quite answer your question, look at the sources that they cite as the source for their guidance to find the administrative code. Then check the sources references including the administrative code to find the relevant part of the tax code. This also works with Letter Rulings and Court Decisions.  

Don’t forget the power of mainstream search engines. With department guidance and many tax and administrative codes published online, you can get a lot of sales tax answers from the actual legal authorities via search engine. A lot of states also publish things like their sales tax audit manuals, which you can also search on Google. Very little of this information is private. Just be careful to filter out the advertisements. All these sources can be beneficial in understanding overall concepts, but you need to know what the purpose of your research is, which is the most relevant and important. 

3. Make Your Taxability Decisions

Once you’ve conducted your research, you’ll need to determine whether the product or service is taxable or exempt. You should also identify what circumstances may change this determination. If you’re having difficulty making the taxability determination, remember that seeking outside help is an option. You can also request a private letter ruling from the Department of Revenue if precedence hasn’t been established for your situation. 

4. Communicate Your Results

Make sure the appropriate people in your company are aware of the results. You’ll want to identify the individuals who will be using your research results. You should also evaluate different formats to communicate the results, so you can determine how the results can most easily be reviewed and understood.  

For example, if you are researching the taxability of items you buy for your Accounts Payable department to use in reviewing vendor invoices, a matrix with clear decisions is probably the right delivery method.  But if you are putting together your position for a protest of an audit for your tax director, a well-thought-out detailed analysis in a memo is a better choice. As with any research project, also make sure to retain copies of all research you used, so you can justify the decisions or determinations you’ve made. Online sources tend to update and change, so if you need to go back and find what you relied on, it might not exist in a year! 

5. Take Action

Now that you’ve conducted the research, put it to use! You can help your company reduce costs by creating and acting on tax strategies based on your research findings. If your company uses tax software, update the configuration rules to reflect proper taxability. And continue to track hot topics that may affect your company down the road. 

Sales and use tax research is a benefit for your company to stay in compliance, avoid or lessen audits, and more. At the Sales Tax Institute, we conduct tax research on a daily basis. Sales tax laws change and evolve over time, so it’s important to make tax research or at least reading about tax changes part of your regular routine. 


One of the key steps to tax research is discovering the best resources to help you out along the way. Finding resources that work well for sales tax is quite difficult, so we have put together a webinar to help you out! The time that can be saved by knowing the right resource to use can save tremendous effort and funds for the company. 

Posted on January 15, 2024