Tag: nick rishwain

DepositionExpert Witness

Increasing Use of Remote Depositions – Expert Witness Best Practices

Remote depositions appear to be growing. As an expert witness, what should you do to improve your presentation and performance to maintain credibility and authority?

As more professionals work from home, remote depositions will continue to rise in popularity and usage. But, the extent of the rise is hard to tell since there is a lack of any hard data on the subject. One of our contributors, Isaiah Leslie, has provided some anecdotal information on the subject. We know court hearings and administrative meetings are taking place remotely. In an article from the Fort Worth Star Telegram, we learn about what may be the first remote jury trial in the U.S., which occurred in Texas. With an increase in remote hearings, depositions, and even jury trials, we wanted to give you some information about presentation and performance as an expert witness in remote deposition.

There have been an abundance of articles discussing remote depositions, but none of them appear to cover best practices for the deponent and, relevant to Experts.com members, the expert witness. Instead, the articles discuss the law permitting remote depositions; the local rules to be followed; agreements between lawyers about sharing of discoverable information; procedures for exhibits; whether the deposition is going to be taken by video conference or the deposition is being video recorded; and operation of several of the remote video platforms. The information is important for all parties to a litigation, but none of it helpful to the deponent.

To this end, I had to do some digging and contact a bunch of folks for their insights. We received some great feedback from court reporters, court videographers, and live video marketing professionals. Below is a summary of suggested best practices for expert witnesses before and during a remote deposition, focusing on presentation, apparel, lighting, audio, video, and overall performance.

Increase in Remote Depositions:

One of our contributors, Isaiah Leslie, a co-founder and partner at Regal Court Reporting, provided us with the best data on the increase in remote depositions from his company’s personal experience. In March of 2020, only 2.6% of their depositions were remote. By April, all of their depositions were remote, increasing by 550%. Although remote depositions have not outnumbered their previous in-person deposition numbers, as Isaiah noted, the adoption is still significant.

The increase in remote depositions makes sense, given the shelter-in-place orders throughout the country. Many of those who adopted remote deposition by necessity have discovered its advantages. By no means am I suggesting remote depositions would replace in-person depositions entirely. However, as legal professionals become more comfortable with videoconferencing technology, it’s reasonable to anticipate continued growth in remote depositions even after COVID-19.

Legal system participants are likely to realize, if they have not already, the value of videoconferencing. It is convenient for all involved, as there is no need to travel to the deposition location. Reduced travel should lower litigation costs as parties will no longer have to pay for travel time and costs (for lawyers and expert witnesses). Most importantly at the present time, it provides the added benefit of being socially distanced.

With this expectation remote depositions will become more prevalent, even post-COVID-19, here are the suggestions from our contributors, to help you as a deponent, give your best presentation and performance.

Court Reporter Suggestions:

Isaiah Leslie and I have become friendly on Twitter, which for those who know me, is where I’ve made a significant number of professional relationships. Isaiah brought his partner and wife, Stephanie Leslie, into the conversation so we can get some outstanding suggestions direct from a court reporter who regularly participates in depositions.

As with other past blogs, I provided a variety of questions and Mrs. Leslie provided some outstanding responses (some edited for brevity and clarity).

Nick Rishwain: Have you experienced an increase in remote/virtual depositions during COVID-19?

Stephanie Leslie: We have certainly seen more remote depositions than usual, but unfortunately most law firms are still not jumping on board fully quite yet for a variety of reasons. One being their lack of comfort with the technology aspect of things. Once they try it, they typically schedule more after that. It’s just making the plunge.

NR: Based on your experience doing in-person video depositions and remote depositions, have you identified any best practices for deponent performance?

SL: The most crucial thing with remote depositions is abiding by the admonition to not talk over others. As a working reporter myself, I can attest to the fact that speakers talking over each other is always a nuisance and makes my job exponentially harder, but in remote depositions it is absolutely critical because remote platforms, such as Zoom, act similarly to a speakerphone, and it can only choose one voice to allow through the system, so if there is simultaneous speaking, I can usually hear no one. And then, to add insult to injury, if other speakers are talking, I cannot successfully interrupt and remind everyone to speak one at a time because no one can hear me either. I have found that even though it feels very tedious to go slowly and methodically, it actually makes the deposition go more quickly and smoothly.

NR: My customers are concerned with coming across as credible, knowledgeable, professional and authoritative in their field. What do you recommend for best remote deposition performance?

SL: I have taken several expert depositions recently, all remotely, and I don’t think the virtual aspect of the deposition makes much of a difference. I felt like it was any other expert deposition. It was very clear to me which experts were knowledgeable and confident about the subjects upon which they were opining, and others were obviously not as much. I think a great CV and clear opinions backed by evidence still come through clearly to all observers.

NR: Any suggestions on apparel, lighting, audio/video setup?

SL: I have seen some sharp solid-colored virtual backgrounds created with an expert firm’s logo placed in the top corner just to the side of the witness, and it is very professional looking and memorable while not detracting from the substance of the proceeding. Apparel — I suggest still making sure you’re completely professional on top. What’s on bottom is up to you! I use an inexpensive cube light to help illuminate my face, but if the room is well lit (not too much back light), I don’t think it’s particularly necessary. Audio is the most important thing. Please test your connection and audio quality beforehand!

NR: Any further suggestions I may not have asked?

SL: As usual (but even more important with remote), if you are able to provide any spellings or technical words to the stenographer before the deposition, that is always appreciated. We usually come into the case with little to no context on the facts and your background and role, so anything you can assist with along the way is invaluable!

Legal Videographer Suggestions:

Isaiah, continued to provide me with excellent access to his team and we got some outstanding feedback from Sean Malone, of Malone Video, who works primarily with Regal Court Reporting.

The same questions provided to Stephanie Leslie were also sent to Mr. Malone. His different experiences from a videographer perspective are equally beneficial to the expert witness.

Sean answered the questions in a slightly different format, which have been edited for brevity and clarity.

Nick Rishwain: Have you experienced an increase in remote/virtual depositions during COVID-19?

Sean Malone: Definitely. Though overall some attorneys are still hesitant to go remote, others have been willing to test, and even embrace remote depositions right now, due to the quarantine. As a legal videographer, before the quarantine I had done exactly zero remote depositions. Since the quarantine, I have done at least 2 to 3 per week, on various platforms, and all for clients that were mainly accustomed to in-person depositions before COVID-19.

For the following, questions 2-4, Sean answered the questions in aggregate.  So, you don’t have to scroll up to find those questions again, I’ve added them below:

NR: Based on your experience doing in-person video depositions and remote depositions, have you identified any best practices for deponent performance?

NR: My customers are concerned with coming across as credible, knowledgeable and an authority in their field. What do you recommend for best remote deposition performance?

NR: Any suggestions on apparel, lighting, audio/video setup?

SM: As a legal videographer, the things that matter in an in-person deposition are the same things that matter for a remote deposition. For example, is the deponent well lit? Are they centered in frame? Can they be clearly seen and heard? I’d recommend a similar approach for everyone involved in a remote deposition: identify your best in-person deposition practices and translate those to the medium of video conference.

Just like in real life, the witnesses I’ve observed that come off well are the witnesses who:

  • Are professionally dressed.
  • Are well mannered/aware that they are the focus of the deposition and the video record.
  • Listen to and directly answer attorney questions.

One note on that last one: Just like in real life, we all know that deponents should let the taking attorney finish their question before starting to answer, and also pause a little so that the opposing attorney can get in their objections… But this is especially important during a remote deposition, because of that notorious split-second delay present in all video conferencing platforms.

To present yourself well and make the videographer love you, you can:

  • Make sure you are well lit, and not heavily backlit.
  • Make sure whatever is in the background behind you is relatively neutral and not distracting (in other words, maybe take that Backstreet Boys poster down before logging on).
  • Make sure the area around you is tidy and free from clutter.
  • Make sure the camera built into your computer is as close to your eye-level as possible. If the camera is too low, like on your lap for instance, everyone will view you (and the video record will capture you) from an unflattering, upward angle. Eye-level or at least face-level is the best idea for a flattering shot of you.
  • Ideal framing is you in the center of the frame, with your torso and head visible in frame, with a little bit of headroom on top (headroom is the small space between the top of your head and the top of the frame). See picture:

sean-malone-legal-videographer-frame-example

  • Make sure you are joining the video conference from a reliable device that has a decent camera and microphone built in.
  • Make sure that device is charged!

Some additional tips on your Internet connection. So that your testimony can be captured optimally by both the court reporter, and the videographer, make sure your Internet connection is as strong as possible. Office internet is more robust than home internet, but if you are at home, you can try:

  • Connecting your device via Ethernet cable rather than WiFi.
  • If you cannot connect via Ethernet cable, choose the spot in your home with the strongest WiFi signal.
  • Ask other members of your household to refrain from moderate or heavy Internet use that day (e.g. have them avoid streaming TV, playing online games, etc.)

NR: Any further suggestions I may not have asked?

SM: I always like to say that everyone in a deposition has a job to do. Therefore, I try to help others do their jobs well, by doing my job well. I think that approach can be helpful no matter what your job is!

As we feel this is going to be a growing experience for witnesses and expert witnesses, we wanted to create a blog post that is truly helpful to your presentation and performance. So, we brought in one more voice to help you nail that remote deposition!

Live Video Marketing Professional Suggestions:

As some of my readers know, I’ve been doing live video since about 2015. However, I do it as a hobby. Our next contributor does it professionally and has written a book on the subject. I’m just lucky enough to know her and call her a friend. Jennifer Quinn, is a leading consultant on Internet live-streaming. I reached out to her and asked her for her input regarding presentation and performance.

Here are the suggestions provided direct from Jenny. In this instance, I asked questions more generally and Jenny gave me us some outstanding suggestions, all of which should be considered for remote depositions.

NR: I’m looking for suggested best practices. How would you want an expert witness to be prepared for remote deposition? What best practices do you suggest?

Jennifer Quinn: The fastest way to build trust with someone is to show up the way they expect you to show up. Traditionally, as an expert witness, you would arrive, dressed professionally, sit upright, and be fully prepared for the deposition.

The question most expert witnesses have today is how to transfer that same level of authority, and trust one would have face to face or in-person to a video format.

There are a few quick and easy ways to convey instant authority and credibility when preparing for a video deposition.

  1. Pay attention to your background – be sure it conveys professionalism.
  2. Dress the same way you would dress if you were attending court in person.
  3. Make virtual eye contact with the video viewers by looking directly into the lens of the camera. Yes, this will feel awkward; however, it is possibly the most crucial skill you can master if you want to instantly build trust in this new era of video. Looking directly into the lens of the camera simulates eye contact and conveys authenticity more powerfully than anything else you can do when recording video.

In my book, I reference the need to pay attention to L.A.V.S.: Lighting, Audio, Video, Stability.

Lighting:

  • Daylight – sit in front of the window with the light shining in on your face.
  • Ring light – clips on to your phone.
  • Box lighting – home office studio setup.
  • Turn off the overhead lighting in the room.

Audio:

  • Earbuds with built-in mic.
  • External microphone.
  • USB/Studio mic.

Video:

  • Cell phone camera.
  • Built-in webcam.
  • USB webcam.
  • Keep the lens camera at eye level.
  • Look into the lens.

Stability:

  • Prop phone up – at eye level (think books, boxes, etc.).
  • Tripod or mount.
  • Desktop/laptop – don’t bump desk or table.

There you have it. Four different individuals telling you how to up your remote deposition game as remote depositions have drastically increased in the last 90 days.

Throughout shelter-in-place, many lawyers and parties have experienced the benefits of remote depositions. It has proven both convenient and cost effective. We do not expect the trend in growth to wane any time soon. If anything, we could be witnessing a completely new shift in how the legal system communicates.

Computer SecurityExpert WitnessInformation & Communication TechnologySecurity

Is New Hampshire the Next Iowa Voting Disaster? Information Technology Expert Analysis

A hastily-developed app and combined with a lack of user testing caused a ruckus in Iowa Caucus voting this week. What’s in store for New Hampshire, Super Tuesday, and beyond?

It has been an exciting week in US politics. We had a State of the Union address and an impeachment vote. A whirlwind week by any standard! Before we could even get to those two events, we started the week with an outrageous technology failure in the Iowa Democratic Caucus. For purposes of this blog post, I’m not going into the differences between a caucus and a primary. Let’s just assume they accomplish the same result: selecting a candidate for political office.

For the Iowa Democratic Party, Monday night was a disaster and then it continued into Tuesday, Wednesday… you get the idea. As I write this blog post on Friday morning, I’m not even sure if they have an official determination of who won. The news stories seem to be conflicting.

So here is what we know about the app (IowaRecorder) failure based on available reports. The Iowa Democratic Party hired a marketing technology company to build an app which would be used, statewide, to report results of local caucus votes (I’m simplifying for purposes of brevity). The app was going to be used to submit voting results. Nobody was actually voting through the app.

This first really good article I read that outlined the technology implementation failure, came from Slate. Here was a good summary from a couple of days ago:

“It’s still unclear what exactly went wrong with the app, but all of these issues appear to have something in common: The Iowa Democratic Party clearly wasn’t prepared for any possible issues with the app and a more involved method of vote reporting introduced this year—and sure enough, it reportedly turns out that the app was never tested on a statewide scale. Shadow, which is run by alumni of the Barack Obama and Hillary Clinton campaigns as well as Google, was paid $60,000 to develop the app, but it had just two months after party officials decided to abandon plans to report results over the phone.”

There’s some updated information on the failure from Motherboard, which was released yesterday (along with the app code). Below, you’ll see that they released an app that was still in beta format:

“And Instead of going through proper app store review processes conducted by Apple and Google, Shadow used beta testing platforms like Apple’s TestFlight to distribute the software so it could meet the Monday deadline. So when it came time for the app to do its most critical role — letting Democratic precinct leaders report results from Iowa on Monday — it failed in every way imaginable.”

Expert Analysis:

As I do when these major stories break, I turn to Experts.com members to get insights. You may recall Dr. Stephen Castell. Dr. Castell, Chartered Information Systems Practitioner and Member of the Expert Witness Institute, is Chairman of CASTELL Consulting. He is an internationally acknowledged Independent Computer Expert who has been involved in a wide range of computer litigation over many years.

Dr. Castell and I wrote a blog post back in 2018, regarding West Virginia’s Blockchain voting program. They are actually expanding this plan, which may necessitate a separate blog post.

Below, please find my questions and Dr. Castell’s answers (Disclaimer: these questions and answers provided on February 5th, 2020):

Nick: From available reporting, it appears the Iowa Democratic Party failed to do a statewide testing of this vote reporting application. What type of tests would have been necessary to identify errors in the system before statewide roll-out?

Dr. Castell: As other ICT professionals comment in the reports, there should be thorough systems testing and QA procedures, including User Acceptance Testing and Pilot Trials, plus scaled-up ‘soak testing’, before contemplating any real-world launch, such as this statewide roll-out. You expect to get errors in systems testing – its main purpose is to identify faults and fix them. Sadly, software systems and Apps these days do seem often to be launched publicly without adequate systems testing, let alone with adequate prior User Testing and Pilot Trials. If such standard professional QA processes were omitted, or truncated, for something as high-profile and important as an App to collect and relay voter data in the Iowa Caucus, that does appear rather astonishing.

Nick: It doesn’t appear that all of the fault lies with the app developer. It seems the Iowa Democratic Party only gave the app developer 2 months to develop and deploy this application. What sort of time-frame would you anticipate to develop, test, and implement a software of this scale?

Dr. Castell: That is difficult to estimate without more knowledge of the actual detailed Customer Requirements Specification that the developer’s App was contracted to meet. On the face of it, an App simply to in-gather voting data, aggregate and transfer it, sounds in principle like fairly straightforward functionality to code, test (at scale) and implement, and 2 months may not have been an unrealistic timescale for development, testing and deployment.

Nick: Would you expect there to be a certain level of user sophistication for those using the app on this scale? Should there have been company representatives available at caucus sites?

Dr. Castell: Reports suggest that there was little prior familiarity, let alone ‘training’, or ‘user sophistication’, with the App on the part of those expected to employ it for real, in the high-pressure, real-time Iowa Caucus conditions. Whatever the state of compliance of the App with its contractual specification – perhaps reasonably well delivered to time, budget, specification, and of suitable quality, ‘fit for purpose’ – if there was no program for adequate user familiarity and training, plus some sort of support and trouble-shooting team from the developer company at caucus sites, that alone could account for the problems encountered in statewide roll-out operation.

Nick: From what I’ve read, it looks like the company was paid $60,000 to build this application. Is there any way to gauge whether this is too little or too much for this type of application development?

Dr. Castell: Again, that is difficult to gauge without more knowledge of the actual detailed Customer Requirements Specification, and thus the likely complexity of the functionality needed, and its associated software design and coding; also, there may have been a tight budget to which the developer company was obliged to work. It is not unusual for software developers to invest in a ‘plum’ assignment such as this high-profile Iowa Caucus project, for the promotional and marketing impact that gives them in securing hopefully more lucrative and profitable development jobs later. In this case, the $60,000 could have been much less than the true cost to the developer company of the analyst, designer, coder, tester, deployer and trainer man-days expended in building and launching the App with a statewide roll-out, against a tough deadline.

Nick: What sort of testing, trials, and quality assurance requirements would you have employed prior to such an implementation?

Dr. Castell: There should ideally have been thorough systems testing and QA procedures, including User Acceptance Testing and Pilot Trials, plus scaled-up ‘soak testing’, well understood by ICT professionals, before the real-world launch of this statewide roll-out. Relevantly, I teach a Course Avoiding IT Disasters – the Expert Way, the principles of which are also covered in my seminal paper “Forensic Systems Analysis: A Methodology for Assessment and Avoidance of IT Disasters and Disputes”, issued as a Cutter Consortium Executive Report, Enterprise Risk Management & Governance Advisory Service series (Vol. 3, No. 2, March 8, 2006).


 

We cannot say that New Hampshire is next. All available information tells us that New Hampshire is not using the same company/app used in the Iowa Caucuses. Furthermore, there was talk of Nevada using the app, but they have claimed they will not move forward with the application.

That’s the end of this particular blog post. Though, we’re already in talks about another post related to voting systems.

Criminal JusticeJails and PrisonsLitigation

MDC Brooklyn – Prison Expert Witness on Policies During Freezing Temperatures

On Friday night, February 2, 2019, my Twitter feed exploded with news of the “power outage” at the Metropolitan Detention Center, Brooklyn. There were protesters and news stories trending about inmate health and safety.

It appears the New York Times broke the story, with the headline “No Heat for Days at a Jail in Brooklyn Where Hundreds of Inmates Are Sick and Frantic.” The frantic nature of the story was certainly increased by the protesters outside the facility advocating for inmate rights. Additionally, we were at the tail end of an incredibly cold week, referred to as the “Polar Vortex.” So, the stars had aligned for an uncomfortable and scary incident for those incarcerated. I’m certain I’d experience fear in the same circumstance.

As the New York Times reported, most of the accounts were described to them by Federal Public Defenders who represent the inmates. The inmates were limited in communication with the outside world, but were able to communicate with defense counsel in some instances. It appears heat was the primary complaint, although there were claims of limited hot water access.

In the article above there seems to be a disagreement between different stakeholders (i.e. warden, union officials, public defenders, and inmates) as to whether there was an electrical or heating problem and which one was causing the problem. For our purposes, the cause of the event does not matter. We’re interested in response.

On Monday, February 4th, a lawsuit was filed against the Federal Bureau of Prisons (FBOP) and warden, as described in this article from NBCNews, “claiming the jail kept inmates in “inhumane” and unconstitutional conditions during a dangerously cold week.”

Did you expect a lawsuit would not be filed? This is a legal blog. Of course a lawsuit was filed. Many questions arise. Was the treatment inhumane? Was it as frigid in the facility as reported? Did prison officials fail to provide humane care? It is hard to say from the publicly reported facts. We are unlikely to know, until a FBOP investigation is completed and/or discovery made public.

Nevertheless, I thought it would be helpful for us to get a better understanding of jail and prison policies and procedures from a correctional expert witness.

Jail Management Expert Witness Donald Leach:

Donald L. Leach, II, is a Jail / Corrections Management expert with over 30 years of experience. He has 20 years of consulting experience on jail management issues nationally, focusing on Risk Management for jails and jail operational methodology. Mr. Leach has served as an expert witness for 5 years, in both State and Federal court. His services are available to counsel for both Plaintiff and Defense and include case review, testimony, and consultation for jail and prison issues. You can learn more about his practice at: https://www.dlleach.me/.

As I often do, I posed several questions to Mr. Leach, and he provided answers to those questions. I have posted them verbatim below.

Nick: Are there health and safety requirements for jails/prisons when experiencing inclement weather?

Mr. Leach: The same requirements for providing humane living conditions exist regardless of weather. The Court has not specified what those conditions have to be, unless addressing an individualized case, but they have to fall within a general range of adequate conditions of confinement. This is in a normal situation. When inclement weather, such as the cold hits, then more leeway is typically given because it involves a relatively short period of time.

Nick: Do jails/prisons have policies and procedures in place for responding to a loss of electricity/heat?

Mr. Leach: More likely than not, FBOP has policies and procedures for managing the loss of electricity and heat. These are generally short-term events and are addressed as such. A close reading of the news articles coming out indicates that while conditions may be unpleasant they are far from life threatening. Depending on the facility design, adequate light may be obtained from natural sources-such as daylight. Evening hours may involve the use of lanterns placed in common areas. Again, these are typically short term events and like you address them when the lights at home go out, jails and prisons have similar policies. Additionally, I would be surprised to find that there are no emergency generators that provide general lighting and power life safety systems.

Nick: Assuming a lack of heat and electricity occurs in a jail/prison, while temperatures outside are below freezing, how should correctional personnel address the issue?

Mr. Leach: I would recommend issuing extra blankets, sheets. If additional clothing is available for issuance, provide that. If the weather has not significantly impacted commerce, then possibly an emergency purchase of thermal tops and bottoms. Extra materials would be issued to the female inmates who seem to suffer from the cold more than the males.

Nick: There were concerns about certain at-risk inmates (elderly and those with medical needs). How would you address medical concerns in a similar situation?

Mr. Leach: The administrator may have to consider temporarily transferring those inmates to neighboring facilities. We would do this on a regular and common enough basis, lasting only until the situation is rectified. Agencies will typically work together to overcome these situations. Today it’s freezing temps but tomorrow it may be plumbing!

Nick: Based only on the publicly available reporting (i.e. NYTimes & ABAJournal), what recommendations would you have for other institutions who may face similar issues in the future?

Mr. Leach: There has to be some prior planning for emergency situations such as this. A general outline of actions to take would be appropriate. The details would be decided based upon available resources and issues. For example, you can plan on transferring the elderly and medically fragile but what if the roads are closed. Keeping a stock of emergency supplies, such as extra blankets may be appropriate, or in dry areas it may be pallets of water. This is going to be geographically determined.


There it is folks! I’ll try to be ahead of the curve on the next major story to likely result in litigation.

 

 

 

 

Expert WitnessLawyersMarketing

Creating Compelling Legal Content – Lawyers Gone Ethical Podcast

A huge thank you to Megan Zavieh, of Zavieh Law, for having me on the Lawyers Gone Ethical podcast this week.

This week, I was honored to be a guest on the Lawyers Gone Ethical podcast from California State Bar defense attorney Megan Zavieh. It was a fun, educational experience and Megan is a fantastic host!

What I was surprised to learn is lawyers are very concerned about the ethical ramifications of creating content. The fear is not dissimilar to the concerns of expert witnesses regarding content marketing.

Granted, experts are more concerned that content created to market their services may later be used against them for impeachment purposes (if this is one of your fears, check out this post from a few years ago). Lawyers, on the other hand, are more concerned with upsetting state bar regulators.

The concerns of lawyers and experts are understandable, but they are based in fear. Lawyers can add appropriate disclaimers to their content marketing materials. Experts should not be creating any video or written publications that they cannot defend. In fact, experts can add disclaimers too. For example, “the facts of each case are different. The analysis used in this article/video/blog post may not be applicable in every case.”

The bottom line: Both sets of professionals need to get over the fear and start creating interesting and compelling content. Do so after taking proper consideration of your practice and any ethical standards which may apply. But, get started!

If you are not utilizing content marketing to expand your practice, you are missing out on the ability to distinguish yourself from your competitors.

There are reasons we encourage Experts.com members to write articles. It differentiates them from their competitors, reinforces their expertise, showcases their analytical and writing abilities, and drastically increases their online visibility.

Don’t let the fear win!

LISTEN TO THE EPISODE

compelling-content

Megan Zavieh’s Contact Information:

Website – www.zaviehlaw.com

Twitter – https://twitter.com/ZaviehLaw

iTunes – https://itunes.apple.com/us/podcast/lawyers-gone-ethical/id1352001379

Stitcher – https://www.stitcher.com/podcast/megan-zavieh/lawyers-gone-ethical

Oh, and if you love how the podcast was produced and edited, you should definitely check out Abboud Media.

 

AccountingExpert WitnessForensic Accounting

Online Retailers to Collect State Taxes, per Supreme Court: Accounting Expert Insights

Today the Supreme Court of the United States (SCOTUS) ruled states can force online retailers to collect taxes on the items they sell.

The ruling gives states the power to force eCommerce and Internet retailers to collect sales tax from online purchases, even if the company doesn’t have a physical presence (i.e. no brick and mortar location) in the state. This article from CNN provides a summary of the decision. This post from Bloomberg provides greater detail.

The case originated out of South Dakota and was brought by eCommerce-giant Wayfair.com. Wayfair was arguing against a South Dakota law requiring Internet companies with more than $100,000 in in-state sales, to collect sales and use taxes on goods sold through their website. Naturally, Wayfair was arguing this shouldn’t apply to them as they did not have a physical presence in South Dakota.

This will be a massive blow to online retailers such as Wayfair, Amazon, Overstock, and others. On the plus side, it seems this will level the playing field for all retailers and may even encourage consumers to shop locally.

After a suggestion from friend Mitch Jackson of Jackson & Wilson, I got to wondering, what impact will this ruling have on small and medium businesses? What advice might these small and medium online retailers need to proceed after this ruling? Mitch also covered this same topic in a live video today. His show is called LegalHour.live.

As I normally do in these situations, I turn to our extensive database of expert witnesses to answer these pressing questions. In this instance, we need input from accounting experts.

Accounting Expert Answers:


Michael J. Garibaldi, CPA, ABV, CFF, CGMA, is a Certified Public Accountant licensed in New York. Mr. Garibaldi works closely with law firms and other professional service firms, manufacturing, wholesale/retail, medical, technology, restaurant/hospitality, artists and galleries, construction, and real estate clients where he is responsible for providing accounting, tax planning management consulting services, and financial reporting. You can learn more about Mr. Garibaldi’s services by visiting his website at: garibaldicpas.com.

Posing the same two questions to Mr. Garibaldi, he stated, “The issue and recent ruling is hotly contested and has far reaching implications.” Then he provided the following answers.

Nick: What impact will this have on small and medium sized online retailers?

Mr. Garibaldi: Small and medium online retailers will now have to collect and remit sales tax to the various taxing jurisdictions that they sell in. This will create a significant administrative burden to properly collect the appropriate sales tax for each jurisdiction, file the appropriate sales tax returns and then remit the funds to each taxing authority. Since there is no central taxing authority, the retailers will need to determine the specific law, rules and regulations within each jurisdiction and then timely file and remit the appropriate sales tax collected. This includes not only the states in which the retailers will be responsible to collect and remit the sales tax, but each local  jurisdiction within each state. For example, New York State has over 70 local taxing jurisdictions each with their own tax rate. This will create the need to enhance the technology utilized in processing orders, increase administrative oversight, as well as tax and accounting department personnel to file the returns, etc.

Nick: What advice would you have for small and medium sized online retailers facing the prospect of looming state laws to collect taxes?

Mr. Garibaldi: Online retailers should not wait.  They must begin to develop the systems necessary to properly collect sales tax within each jurisdiction. They should determine the systems and technology needed, design the proper procedures and be ready to implement them as soon as possible. As the old saying goes, an ounce of prevention is worth a pound of cure. Trying to collect and remit the sales tax on the fly will lead to unnecessary work to unravel what was collected and to whom it needs to be paid, not to mention the liability that comes with collecting sales tax. Business owners should take heed that this is a fiduciary responsibility so the owner(s) of the business can be held personally responsible.


Steven G. Roberts, CPA, CFF, CFE, CCI, CGMA, FCPA, is a forensic accountant and economics expert witness focusing valuation, economic analysis, economic loss measurement, forensic accounting, and fraud examination. You can learn more about his service here: veritasteam.com. He was unable to opine, but we received some initial thoughts from Dr. Wade Roberts, a senior forensic economist with Veritas:

Nick: What impact will this have on small and medium sized online retailers?

Dr. Roberts: The ruling was limited to the large online retailers. Additionally, states will have to adopt laws that specify and delineate the tax implications over the coming months/years. For businesses impacted, they will potentially compete for online business against states with more favorable tax treatment.

Nick: What advice would you have for small and medium sized online retailers facing the prospect of looming state laws to collect taxes?

Dr. Roberts: Small or medium size online businesses needing to comply with tax rules over thousands of tax jurisdictions will likely encounter added costs in the pursuit of adhering to the ruling. Businesses should determine the best tax software for their circumstance, attempting to both meet the needs of their operations, while at the same time minimizing the costs required for the added software. Many small and medium size businesses are already moving in this direction as is evidenced by the dramatic rise in Avalaro’s stock price.


Tiffany R. Couch, CPA, CFF, CFE, is Principal at Acuity Forensics, a Pacific Northwest forensic accounting firm. She has more than 20 years of experience in the field of accounting with the last 13 years focused completely on forensic accounting related engagements. Her expertise is in matters involving fraud investigation, forensic accounting, contract and regulatory compliance, internal control risk assessment, and complex litigation. You can learn more about her services at her website: acuityforensics.com.

Nick: What impact will this have on small and medium sized online retailers?

Ms. Couch: Likely cost to track the transactions and file the returns each month. There will also be a potential cost of buying software to handle this kind of tracking and reporting.

Nick: What advice would you have for small and medium sized online retailers facing the prospect of looming state laws to collect taxes?

Ms. Couch: Make sure you have a GREAT sales and local use tax CPA who can assist in ensuring you have an appropriate accounting and record-keeping system to ensure compliance. Also, don’t get behind on paying these taxes. I recommend setting aside the sales tax funds in a separate account so that the funds are available when it’s time to remit the tax.