Since 1959, Allied Tube & Conduit has been reshaping the pipe and tube industry. The company manufactures and supplies galvanized steel tubes and pipes, electrical conduits, armored wires and cables, metal framing systems, and building components in the United States and internationally. It operates a manufacturing facility in Wisconsin as a division of Atkore International Holdings, Inc., headquartered in Illinois.
Situation
Atkore faced a Wisconsin sales tax audit where the major issue was the company’s software implementation. The Illinois parent company had implemented new software at the Allied division in Wisconsin nearly four years prior and had capitalized it when the state proposed taxing all of it—to the tune of over half a million dollars.
This predicament highlighted not only the complexity of large software implementations, but also the lack of understanding subsequent tax laws when there are business entities based in various states. As it happened, the controller at the Wisconsin plant had a positive experience with Wipfli’s State and Local Tax Services team while previously working for another manufacturer. He suggested to the parent company that it seek out the firm’s expertise in Wisconsin tax laws.
Strategy
Wipfli brought its strong understanding of sales and use tax to the engagement and over the next three to four months, the firm worked alongside Allied to gather the necessary support. While the manufacturer sifted through the dated project’s paper trail, Wipfli combed through all the disparate vendor data.
The firm then segregated the numerous vendor tasks performed along with their assigned costs so as to determine the activities that were considered taxable services under Wisconsin law. Wipfli also segregated the internal implementation costs as well as other third-party programming costs. Ultimately, the firm was able to calculate and demonstrate the actual tax base—the software license itself, plus some installation costs.
Benefits
The engagement brought welcome news for the in-state division and its out-of-state corporate headquarters. It reduced their liability and resulted in a significant sales tax reduction.
Instead of the proposed $550,000 Wisconsin state tax adjustment, Atkore and Allied Tube & Conduit paid just under $55,000 in tax.
