Streamlined Founder Diane Hart’s Extraordinary Career

Diane L. Hardt is Administrator of the Division of Income, Sales and Excise Taxes (IS&E) in the Wisconsin Department of Revenue. Diane was appointed administrator in May 1993 by the Secretary of Revenue.

The IS&E Division is responsible for tax policy and administration of all income, franchise, sales/use and excise taxes, including processing, audit, customer service, collections, criminal investigations, and technical services. The division has 812 permanent employees and 62 seasonal employees.

Prior to her appointment as administrator, Diane held positions as an auditor, audit supervisor, Director of the Tax Processing Bureau and Director of the Audit Bureau. Diane has an undergraduate degree in accounting and a Masters of Business Administration degree, both from UW-Madison. Diane is also a Certified Public Accountant.

Diane served as co-chair of the Streamlined Sales Tax Project for eight years. She has also served in various officer positions, including President, of the Streamlined Sales Tax Governing Board. Diane also received the FTA Harley T. Duncan Leadership Award in 2019.

Russ: Diane, thank you for joining us to talk about your career and accomplishments, the lessons you’ve learned, and your thoughts on the future of tax administration. I want to start with what I regard, and what I think nearly all government officials, regard, as a signal honor.

In 2003 Governing Magazine named you public official of the year, citing your work as co-chair of the Streamlined Sales Tax Project. Governing Magazine praised you for succeeding where many others had failed in getting states to agree to simplifications large and small. You were cited for your vision, patience, and diplomacy, for keeping administrators focused on the big picture, for outreach and trust building with the business community, and for a cross country blitz making the case for the project to conferences and legislatures. This was an enormous undertaking with high risk of failure. Why did you do it?

Diane: First, I need to recognize my co-chair, Charles Collins. Charles had retired from his position as leader of the Sales and Use Tax Division at the North Carolina Department of Revenue by the time I received the honor. He should have been there with me as he worked so hard on the project.

Charles and I were passionate about our mission of leveling the playing field between remote sellers and brick-and-mortar stores. We were also passionate about ensuring that businesses and governments worked together to get to the best solutions and practices. We had past experiences in negotiating with the direct marketers and we really believed that this long-standing problem could be solved.

Russ: You had already had a distinguished career at the Wisconsin Department of Revenue as your brief bio above illustrates. How did that prepare you for your Streamlined work?

Diane: In my 45-year career at WDOR, I sponsored and led numerous projects, brought internal and external stakeholders together to solve problems, negotiated agreements, and learned a lot about getting the most out of the talented people we have. Streamlined participants (government and businesses) had and have so many tax experts but also so many people who know what it takes to get to reasonable solutions and consensus as well as political acceptance. It has worked well to combine businesses, tax administrators and policy makers.

Russ: What do you think were the major successes of the project?

Diane:

• States, local governments, and businesses working together toward one common goal. I don’t think there was ever a project like this in the past or since that has achieved these kinds of results.
• Uniform definitions that have had “staying power.” Policy makers can see the advantages of having uniform definitions across states.
• Uniform sourcing rules. This was, of course, necessary when you are dealing with remote commerce. It was not easy to get to uniformity though.
• Addressing definitions and sourcing rules for digital products and services. There may be adjustments in the future, but this was the first solid effort to address the digital world.

Russ: Sometimes it is the small issues that are the most difficult. You were a leader in the implementing states and went on to chair the Streamlined Sales Tax Governing Board. What do you remember as the most difficult “minor” issues to resolve? And why are these smaller issues sometimes so difficult?

Diane: It was what appeared to be small administrative issues such as a uniform method to round numbers or a uniform way to define a sales tax holiday. When you have multiple states with multiple definitions and administrative procedures, and you have the business community that has its own interests, what seemed easy was not always easy. Out of urgency of getting to agreement, we did do a lot of work and had numerous agreements in the first year of work. As more people got involved, they had their own interests, so we had to go back and re-visit past work. But we reached a final agreement in 2002 and that was a major milestone.

Russ: In your article “The Five Elements of a Streamlined Sales Tax System,” published well before the Supreme Court’s Wayfair decision, you emphasized the need for commitment. “This is not just about government commitment, because some businesses have vested interests in some of the complexities of the current sales tax system, neither is this just about business commitment, because state and local governments have to change to meet the borderless economy.” The five elements you named are:

1. Uniform Definitions
2. Uniform Sourcing Rules
3. Implementation of the new technologies
4. Continuing the dialogue between governments and businesses
5. Flexibility in creating and maintaining the streamlined sales tax system.

How would you grade governments and businesses on the initial implementation of these elements?

Diane: I would give a grade of “B+” because we can always do better. All of us recognize that it would be better if all sales tax states adopted the uniform definitions and sourcing rules and used the new technologies. Still, this was a long and difficult road, and it is a great success to have 24 states join together. Governments and businesses have accomplished so much in the Streamlined Sales and Use Tax Agreement originally approved on November 12, 2002, and in the amendments approved since then.

Russ: With the Wayfair decision the sales tax world changed. State and local governments got the collection authority they were seeking. Major businesses got the “level playing field” they were seeking. Do you think we face a danger of complacency from both governments and businesses because they now have much of what they were after?

Diane: Yes, we do. This is not a once and done kind of achievement. It will take hard work to carry on with simplification and uniformity.

Russ: How can we make sure Streamlined keeps its edge?

Diane: I think educating tax administrators and policy makers in current member states is most important. People change and we don’t want a current member state to let its membership lapse just because its personnel change. We should also take advantage of changes in leadership in other states and see if we can persuade new member states to join. The business community can communicate to policy makers and tax administrators how important uniformity across states is to them. It has to be a collective effort.

Russ: Everyone who knows you talks about the tremendous amount you gave to sales tax simplification efforts. What did you gain from them?

Diane: From my perspective, I developed a lot of relationships with tax administrators and businesses and their representatives. You’d be surprised how many of those relationships have translated into contacts about Wisconsin tax matters. I have always welcomed those contacts. I tell my staff that they too need to develop relationships with our stakeholders as relationships break down barriers and fears about tax administration. We can solve problems together.

Russ: If I were to ask employees at the Wisconsin Revenue Division what distinguishes you as a leader and manager what do you think they would say?

Diane: I think they would say that I have been a visionary for the Wisconsin Department of Revenue and tax administration in general. I think that they would say that innovation and excellent customer service are encouraged and expected. I hope that I have communicated the importance of ongoing employee education, skills building and engagement. And I hope the managers continue to develop relationships with our stakeholders that will take us to the next level in tax administration.

Russ: You are a change agent. Managing change in state government agencies is a tough job. Major reorganizations can be especially challenging since they necessarily require changes in culture as well as systems. In 2015 you undertook a full Audit Bureau reorganization.

1. What were your goals?

   Diane: Multiple goals came together. Our Legislature budgeted for an additional 102 auditors and audit-related positions to bring in taxes already due as opposed to new taxes. We reorganized staff by tax type so that our auditors weren’t having to learn both corporation franchise/income tax and sales and use taxes. We thought they would be more efficient and effective. We modified how we train auditors by alternating classroom and practical application for the first year. We dedicated the new positions to nexus determinations (businesses not filing and paying that should have been), out-of-state sales and use tax audits, multi-state corporate franchise/income tax audits, and the newer frontier—pass-through entity audits. We did some workforce planning to the future as our staff started exiting for retirement.

2. How did it go?

   Diane: It took a couple of years to get the new auditors trained and capable of taking on larger audits but from our measures of success, it was a tremendous effort in achieving better compliance. I think we are in a better position to deal with workforce retirements.

3. What were the key elements in your process that promoted success?

   Diane: Employee training and mentoring, more pay progressions to hold on to experienced auditors, expanding two offices just outside of Wisconsin’s borders to expand our recruitment market and out-of-state presence, more data analytics in finding under-reporting and non-compliance.

4. It is relatively easy to understand the benefits to the Audit Bureau and Revenue Department from a successful reorganization like this. What are the benefits for businesses?

   Diane: Wisconsin has not had to raise any of the general business taxes because we are bringing in taxes already due. In fact, since 2015, Wisconsin has reduced the individual income tax rates by about 14.6% which is attributable to a lot of factors. You might recall that by law, Wisconsin used its additional revenue related to post-Wayfair sales tax collections to reduce income tax rates. Additional revenues related to Wayfair, marketplaces and audits have allowed the policymakers to reduce individual income taxes.

Russ: You have had a remarkable career, working with many government and business leaders. What is your advice to tax professionals in state government and businesses who are just getting started in their careers?

Diane: Diversify your experiences and build your resume; continue your education; get leadership experience even if you are not a supervisor; help develop your co-workers; recognize that relationships are important to your success (consider all stakeholders (government and business)). Do what you love and love what you do.