Presentation to IMA about the basics of Sales and Use Tax compliance, audits, and the possibility of VAT in this country. KAMAL ADENI

1. Keith Fleury 302.225.5146 Don Gillespie 301.296.7894 Kamal Adeni 610.409.1661 Scott Bricker 302-225-5153 Nuts & Bolts about Sales and Use Tax, Everything you wanted to know but (maybe) were smart enough not to ask. April 29, 2010

3. Brief Fact #1 The IRS tax code itself fills 2,840 pages, and contains about 2.8 million words. In comparison, the Bible has 1,340 pages and about 0.8 million words.

4. Who Said What About Tax Complexity “ It’s time for a complete overhaul of our income taxes……I feel it’s a disgrace to the human race.” Future President Jimmy Carter campaigning in 1976

5. Who Said What About Tax Complexity “ The hardest thing in the world to understand is the income tax.” Albert Einstein, as quoted in Crown’s Book of Political Quotations.

6. Who Said What About Tax Complexity “ “ Every tax bill …is the culmination of strident debate and…compromise. This can lead to mind-numbing complexity as the different philosophies, fight for a bill that represents their respective agendas. To pass a bill, the competing political factions split the differences and come up with Frankenstein, leaving taxpayers with the impossible task of sorting it all out.” Senator William Roth

7. Who Said What About Tax Complexity “ Taxation of business is even more complicated (than individual taxation). The average Fortune 500 company spends over $2 million per year on tax matters; many of the largest corporations spend over $10 million per year,…” Tax Compliance Expert, Joel Slemrod

8. Who Said What About Tax Complexity “ No one should ever see how law or sausage is made.” Chancellor Otto von Bismarck

20. 2009 Select State Tax Collection (Percentage of All States Total) 10.3 5.6 34.4 31.9 1.8 U.S. Total 49.1 -- -- 35.8 10.4 Wyoming 6.2 4.3 42.9 28.2 0.9 Wisconsin 9.2 -- -- 61.2 10.9 Washington 6.9 3.9 55.1 20.8 0.2 Virginia 22.7 -- -- 51.6 -- Texas 13.4 7.8 2.1 60.9 -- Tennessee 15.1 3.7 -- 56.7 -- South Dakota 6.8 3.1 32.9 40.7 0.1 South Carolina 12.1 5.8 31.8 28.3 0.2 Pennsylvania 3.1 4.3 48.5 33.0 0.5 Georgia 10.2 5.7 -- 60.2 0.0 Florida 43.2 7.4 32.5 -- -- Delaware 5.3 3.4 49.3 25.4 -- Connecticut 8.3 9.4 43.9 28.7 2.3 California 4.2 5.3 17.4 50.4 7.4 Arizona 80.1 12.8 -- -- 2.2 Alaska 7.6 5.9 32.1 24.9 3.8 Alabama Other Corporate Income Individual Income Sales Tax Property

33. Nexus Political Issues Are foreign companies at a higher risk of scrutiny?

38. THE AUDITOR’S TARGET- YOU

39. Fight Or Flight ?

40. Fight Or Flight?

41. Fight Or Flight?

44. THE STATE TAX AUDITORS (“We’re from the Department Of Revenue, and We’re Here to Help”) Yeah Right !

46. VAT

47. VAT

52. Fun Stuff ( Strange Sales Tax laws) In Iowa Milky Way is not taxable because it contains flour and is defined as Candy But MILKY WAY® MIDNIGHT does not contain flour is subject to tax

58. That’s All Folks!!!

59. Any questions?

60. Thank You for coming! For additional information please contact us at: Keith Fleury (302)225-5146 Gunnip & Company LLP [email_address] Little Falls Centre Two 2751 Centerville Drive Scott W. Bricker (302-225-5153) Wilmington, DE 19808 [email_address] Kamal Adeni (610)409-1661 [email_address]