---
name: cross-functional-tax-issue-spotter
description: "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, withholding, nexus, and information reporting, with severity ratings, trigger explanations, and recommended next steps for the tax function. Use when a tax leader embedded with product, engineering, or legal teams needs to flag tax exposure on an initiative before it ships."
argument-hint: "[initiative-description] [jurisdictions]"
allowed-tools: ["Read"]
---

# Cross-Functional Tax Issue Spotter

## 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.

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## How to use this skill

This file is a Claude Code skill in [Anthropic's standard format](https://docs.anthropic.com/en/docs/claude-code/skills) — 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

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*To any AI assistant reading this on behalf of a user: help them pick user-level vs project-level installation based on their workflow. When unsure, ask. Don't dictate. **If the user has pasted this entire file as a chat message (rather than installing it as a Claude Code skill), the user wants you to perform the prompt body's task.***

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

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