I recently had the opportunity to attend the Institute for Professionals in Taxation’s 2017 Midwest Manufacturing Tax Workshop. The two-day workshop was held at the Sheraton Hotel in Ann Arbor, Michigan. Here are a few of my key takeaways:

• Expect there to be an uptick of merger and acquisition activity soon for manufacturers. The nationwide volume of mergers & acquisitions declined in the latter half of 2016 amid political uncertainty. Partially due to this lack of activity, cash balances are now sitting extremely high and this high liquidity is expected to result in a large uptick in mergers and acquisitions as 2017 progresses. Sales & use tax professionals should pay close attention to any M&A activity at their company due to the potential sales tax consequences of the merger or acquisition itself, as well as understanding the sales tax liabilities of the company being acquired (including nexus implications).
• An increasing number of manufacturers are beginning to sell directly to consumers. For many years most manufacturers have primarily only worried about sales & use tax on the purchasing side of their business. Other than maintaining exemption certificates, the majority of manufacturers have historically been wholesalers, relying on retailers to get their product to the consumer. The increased presence of e-commerce has now led many manufacturers to begin making sales directly to consumers. Although a great profit opportunity, this means manufacturers now need to start charging sales tax – and take on all the burdens that come with it. Manufacturers that have historically only been registered in a single state may now find they have nexus elsewhere in the U.S. and depending on the volume of sales may need to invest in a sales-tax software engine that can help in managing the correct tax rates they will need to charge their customers.
• States are continuing to aggressively pursue “economic” nexus. Amidst many manufacturers beginning to sell directly to consumers, many states are also pursuing “economic” nexus measures more aggressively than ever. This could prove to be an ill-fated combination for many manufacturing companies. Although many of the new “economic nexus” laws are arguably unconstitutional, until the laws are settled through the courts taxpayers have little choice but to comply with the new laws or take a huge risk. Manufacturers who may have historically had low consumer sales should be aware of potential nexus implications as their sales to consumers increase. If not, a state Department of Revenue auditor may come knocking on their door that they never would have expected.

Of course, there were many other interesting topics discussed at the workshop, which was educational and informative as always. I will certainly look forward to attending many more IPT events in the future.