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Cross-functional tax issue spotter

Reviews a business initiative description — new product feature, partnership, market entry, pricing model, or contract structure — and surfaces relevant tax risks across income tax, indirect tax, transfer pricing…

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Purpose

Translate a plain-language business initiative into a structured map of tax risks and compliance considerations — across every relevant tax domain — so a tax leader can flag exposure, ask the right follow-up questions, and avoid being surprised by a tax problem after the initiative has already launched.

When to Use

Invoke this skill when the user asks to:

  • Review a new product feature or revenue stream for tax implications
  • Assess tax risk on a proposed partnership, reseller, or revenue-share arrangement
  • Spot tax issues in a market entry or geographic expansion plan
  • Evaluate a new pricing model, bundling change, or contract structure for tax exposure
  • Sanity-check whether a business initiative creates nexus, withholding, or indirect tax obligations
  • Prepare tax questions for a product, engineering, or legal kickoff before the initiative is finalized

Inputs Required

Before starting, collect:

  • Initiative description: 3–5 sentences on what the business is doing — the product, deal, or expansion in plain language
  • Initiative type: Product feature / partnership / market entry / pricing change / contract structure / other
  • Jurisdictions involved: Where customers, counterparties, employees, or servers are located (countries and US states)
  • Revenue/value flows: Who pays whom, for what, and how the money moves
  • Entity structure: Which legal entities are involved and where they are domiciled
  • Customer type: B2B / B2C / mixed; consumer / enterprise / government
  • Timeline and stage: How far along the initiative is and when it ships

If jurisdictions or entity structure are unspecified, assume a US-headquartered entity selling into the US and flag the international questions that must be answered before exposure can be assessed.

Instructions

Step 1: Restate the Initiative as a Tax-Relevant Fact Pattern

Strip the business framing and restate the initiative in terms tax cares about:

  • What is being sold or transferred: Goods, digital products, SaaS, services, IP, data, or a hybrid
  • Who the parties are: Seller entity, buyer, intermediaries, related parties
  • Where value is created vs. consumed: Development location vs. customer location
  • How consideration flows: Cash, revenue share, equity, in-kind, deferred

This restatement is the foundation — surface any fact gap here as a blocking question before risk-spotting.

Step 2: Scan Across the Tax Domains

For each domain below, determine whether the initiative plausibly triggers an issue. Rate each as Likely Issue / Possible Issue / Not Applicable and explain the trigger.

Domain 1 — Indirect Tax (Sales/Use Tax, VAT, GST)

  • Does the offering create taxability where it didn't exist (e.g., SaaS taxable in some states, not others)?
  • Does a new jurisdiction or sales volume cross an economic nexus threshold?
  • Does bundling taxable and non-taxable items create allocation/sourcing risk?
  • Marketplace facilitator rules if the initiative involves third-party sellers

Domain 2 — Income Tax Nexus & Permanent Establishment

  • Do new employees, contractors, servers, or inventory create state income tax nexus or a foreign PE?
  • Does a partnership or agent arrangement create dependent-agent PE risk?
  • Does market entry require an entity, registration, or branch?

Domain 3 — Transfer Pricing

  • Does value flow between related entities (IP licensing, cost sharing, intercompany services)?
  • Is the consideration arm's-length, and is there contemporaneous documentation support?
  • Does the initiative shift IP ownership, DEMPE functions, or risk between entities?

Domain 4 — Withholding Tax

  • Are cross-border payments involved (royalties, services, interest, dividends)?
  • Does a treaty reduce the rate, and are the forms (W-8, treaty residence) in place?
  • Does a revenue-share or affiliate payment carry withholding obligations?

Domain 5 — Information Reporting & Documentation

  • 1099 / 1042-S obligations for new payee types or cross-border payments
  • Marketplace/payment reporting (1099-K) if the initiative processes payments for others
  • Customer tax documentation collection (resale certificates, exemption certificates, tax residency)

Domain 6 — Characterization & Timing

  • Could the IRS or a foreign authority recharacterize the arrangement (e.g., sale vs. license, service vs. lease)?
  • Does the revenue model affect timing of recognition for tax (deferred revenue, milestone, subscription)?
  • Are there R&D credit, capitalization (Section 174), or deduction implications from new development activity?

Domain 7 — Industry/Niche-Specific Regimes

  • Digital services taxes (DSTs) in applicable jurisdictions
  • Crypto/digital asset reporting if value moves in tokens
  • Sector-specific excise, telecom, or financial transaction taxes if relevant to the offering

Step 3: Build the Risk Register

Compile every Likely or Possible issue into a ranked register. For each entry:

  1. Issue: One-line statement of the tax exposure
  2. Domain: Which of the seven domains above
  3. Trigger: The specific fact in the initiative that creates it
  4. Severity: High / Medium / Low — based on likelihood × potential dollar/penalty exposure
  5. Jurisdiction(s): Where it bites
  6. Recommended next step: The concrete action the tax function should take (model the exposure, engage outside counsel, collect documentation, register, adjust the structure)

Rank by severity, High first.

Step 4: Surface Blocking Questions

List the 3–7 unanswered factual questions that materially change the risk assessment. These are the questions the tax leader should bring to the cross-functional team before the initiative finalizes. Phrase them so a non-tax stakeholder can answer them.

Step 5: Flag Structural Alternatives (When Warranted)

If any High-severity issue could be mitigated by a structural change made before launch (entity placement, contract terms, payment routing, pricing presentation), note it briefly. Be explicit that this is a flag for deeper analysis, not a final position.

Output Format

  • Structure: Tax-relevant restatement → domain scan → ranked risk register (table) → blocking questions → structural flags
  • Length: 800–1,200 words
  • Format: Prose for restatement and domain scan; table for the risk register; numbered lists for questions and flags
  • Sections: Initiative Restated → Domain Scan (7 domains) → Risk Register → Blocking Questions → Structural Alternatives
  • Tone: Director of Tax briefing a cross-functional team — precise, issue-spotting, non-alarmist; flags exposure without overclaiming certainty on facts that haven't been confirmed

Quality Checklist

Before delivering output, verify:

  • [ ] All seven tax domains are scanned and each is rated Likely / Possible / Not Applicable with a stated reason
  • [ ] Every risk register entry names the specific triggering fact — not a generic domain label
  • [ ] The risk register is ranked by severity (High first), and severity reflects likelihood × exposure, not just one factor
  • [ ] Each register entry has a concrete recommended next step the tax function can act on
  • [ ] Blocking questions are phrased for non-tax stakeholders to answer
  • [ ] Any fact gap that prevents a confident assessment is flagged rather than assumed away

Notes

  • This skill spots issues; it does not render tax opinions or positions. Severity ratings are triage signals, not conclusions.
  • The most common missed issue on product features is indirect tax taxability changing when an offering crosses from non-taxable service into taxable digital product — scan that domain hard on any SaaS or content initiative.
  • Partnerships and revenue-share deals disproportionately trigger withholding and PE issues; treat any "we'll pay a partner a cut" arrangement as a withholding flag until proven otherwise.
  • When the initiative is early-stage, the highest value is often the blocking questions — getting facts pinned down before launch is cheaper than remediation after.

How to use this skill

This file is a Claude Code skill in Anthropic's standard format — markdown with YAML frontmatter at the top.

Installing in Claude Code:

  • ~/.claude/skills/<folder-name>/SKILL.md — auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects)
  • <your-project>/.claude/skills/<folder-name>/SKILL.md — auto-loads only when working in that project (recommended for project-specific skills)

Restart Claude Code or open a new session to register.

Using in Claude.ai, ChatGPT, Gemini, or other AI tools:

  1. Drag this file into a new chat, or copy and paste its contents
  2. Send your task or request as your next message — the AI will apply the skill where it fits

For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills