Focus on New York (and NYC)
This month, we welcome you to the state with the city that never sleeps. New York conjures up images of buildings larger than life, flashing billboards, prestigious universities, American history, and so much more. The state is rich with culture, business, and prosperity.
Business Climate
There’s a lot more to New York State than just New York City. In fact, the state is almost 55,000 square miles and of that area only 470 belongs to New York City. But that relatively small area includes Wall Street, and the nation’s hub of the financial industry.
New York is the home to several financial services corporations, including Morgan Stanley, Citigroup, and Goldman Sachs. In 2012, the securities industry accounted for almost 22% of the city’s total private sector wages. The total wages for the industry were $59.3 billion. Despite the high total wages, only 5% of total private sector jobs came from the securities industry. The average private sector wage in 2012 was $69,200. The average salary (including bonuses) for the securities industry was $360,700, which is over 5 times larger than the private sector average. Of course they are being taxed heavily as well, with 16% of the state’s tax revenue coming from these activities.
Other industries important to New York’s economy include the industrial-commercial, tourism, service, and agricultural industries.
Taxes
New York has an unfavorable tax climate ranking 49th out of 50 states, according to the Tax Foundation’s 2015 State Business Tax Climate Index.Read more
New 2016 R&D Tax Credits? Assembly Bill 437 Introduced
Have you taken advantage of California’s Research Tax Credits before? As it stands right now, this credit reduces income tax for those that paid or incurred qualified research expenses. And you might be surprised to know how many industries and businesses take advantage of the R&D tax credit every year, at both the Federal and State level. Did you know software development, construction, manufacturing, architecture and engineering businesses can qualify? Improvements that expanded the definitions to reward all types of innovation and design work were made over 10 years ago. Now, this law might be improved even further.
California Assembly Speaker Toni Atkins recently introduced a bill that would help businesses - especially small ones - by providing additional benefits to companies with smaller revenues.Read more
Internet Sales Tax News: The Marketplace Fairness Act of 2015
Did you hear the latest in Internet sales tax news? The Marketplace Fairness Act of 2015 was unveiled earlier this month, and it seems to have support from both sides of the aisle. (Ah, yes, but haven’t we heard that before?) The new Act is substantially similar to the 2013 version, but the 2015 version, prohibits states from imposing collection requirements on remote sellers prior to one year after Marketplace Fairness is enacted (versus 180 days), or during the busy holiday retail season between October and December of the first calendar year that Marketplace Fairness Act is enacted.
The legislation would give states the option to require out-of-state businesses to collect and use taxes the same way local businesses do. This would especially impact online sellers and consumers in the form of paying online sales tax.Read more
Focus on Washington
Is Washington the next Silicon Valley? Possibly, possibly not. Regardless, the state has a wealthy portfolio of household name companies including Amazon, Microsoft, and Starbucks. Other popular companies headquartered in Washington include T-Mobile USA, Eddie Bauer, Nordstrom, Costco Wholesale, REI, and Tully’s Coffee. Roughly 1 out of 3 people in Washington have a college degree and over 90% of Washingtonians have graduated high school. To top that all off, Seattle is considered one of the most educated cities in the nation. Over 53% of the population over the age of 25 hold a bachelor’s degree. We assume that all the coffee is the reason for a productive economy and talented workforce. This month, we decided to travel back to the west coast and put our focus on the Evergreen State!Read more
Happy Anniversary to Miles Consulting
I’m proud to dedicate this blog to the 13th anniversary of Miles Consulting Group. Yes, the company becomes a teenager this month! It sounds cliché to say that I can’t believe where the years have gone, but it’s true. It’s exciting to mark the occasion and celebrate for a moment the many successes that we’ve had along the way. As a company growing up in Silicon Valley, where the entrepreneurial spirit is alive and well (and has been throughout the company’s tenure), we’ve watched many things change over the years - both within the company and around us.
Inspiration
In my association with Vistage (my CEO advisory group) and various networking groups (NAWBO-SV, ProVisors, and AFWA), I sometimes have the opportunity to speak and counsel other business owners, or those thinking about starting a business. I am often asked the question, “What inspired you to start your business?” Bill Labhart (my partner) and I decided to start the business in 2002 when we had one too many lunches together while at a Big 4 firm and convinced ourselves we could do it better on our own. We wanted to provide quality services to companies that valued and respected our services, and do it with people we liked. While we never officially put it in writing, we had a "No @$$hole" policy with respect to employees, vendors and even clients. It served us well. Sure, we all want to land that next big engagement, but not if it means working with people that you don’t like. That unwritten policy has stayed intact and I think it’s a key to our success thus far!
Changes & Reflection
In 13 years, we’ve certainly seen our share of change. We’ve endured changes to tax laws that have impacted our clients and our own business. We’ve been a part of economic highs and lows, and watched our clients acquire and/or become acquired. We’ve hired several great employees over the years (most while they were still working on their accounting degrees) and many of them have moved on to large firms, which makes me very proud. (They’ll be back!) We’ve served clients in many industries including technology, banking, construction, utilities, retail (brick and mortar and on-line commerce), and others. We’ve served Fortune 100 companies and also very small businesses, from California to New York, and many states in between! And we’ve won a whole lot more engagements than we’ve lost. My partner retired in 2013, and in 2014, I changed our name, logo, branding and website to reflect who we are today. What hasn’t changed since 2002 is providing good quality state tax services with, and for, people that we like!
Thank you!
For all of you that have been employees, clients and vendors over the years, thank you! Thank you for helping us launch 13 years ago, to grow and to support us in so many ways. Thank you also to friends, colleagues and family, without whom much of this wouldn’t have been possible (or fun).
I look forward to the opportunity to continue to provide service to amazing people at amazing companies. Happy Anniversary Miles Consulting! Here’s to many more!
Photo credit: imagarcade.com
Business Formation 101: Choosing a State for Your Company
When you started or expanding your business, what criteria did you use for selecting a location? Did you opt for a “business friendly” state? Because each state offers different taxes, fees, credits and incentives, it can be hard to know how to choose the best fit for your company.
One important idea to keep in mind is that selecting a state of incorporation for your company doesn’t only come down to taxes, fees, credits and incentives. It’s also important to think about where your business will operate and have nexus. Although “business friendly” states certainly sound appealing, they aren’t always the best choice for entrepreneurs – especially small business owners.
A good principle to keep in mind is that if your business has five or fewer shareholders it may be best to form a corporation or LLC in your home state – where you live and will be conducting business.
With that in mind, here are 6 key business formation criteria to keep in mind:
1. Initial fees. Some states require one-time formation fees for new corporations or LLCs. In some states, like Arkansas, Colorado, Oklahoma and Mississippi, this fee is as low as $50. For others, like Texas and Connecticut, it’s as high as $310-$455. Fortunately, this initial fee shouldn’t have a long-term impact on your company.Read more
Making Sense of The Cloud, SaaS and State Tax
One of the hottest areas in the sales tax arena right now is the taxability of cloud-computing, cloud-based services, etc., collectively often referred to as Software-as-a-Service (or “SaaS”). The very moniker alone is enough to start the state tax conversation down an interesting path.
The Basics
When we work with clients to determine how something should be taxed, we start with a few basic premises and then work from there.
Premise #1: The taxpayer must have taxable presence (or “nexus”) with a state before the state can require the company to collect and remit sales/use taxes. Nexus is created in a variety of ways, but it still refers to a physical presence, including such things as having employees in the state, third party contractors acting on the company’s behalf in the state, owning property (such as inventory) in the state, and owning or leasing office space in the state.
Premise #2: Once nexus is established, in general, the sale of tangible personal property by a retailer to a customer in a given state is generally taxable. We start there, and then review the transaction to see if there are any exemptions that would cause the sale of the property to not be taxable. Exemptions may fall under categories such as the nature of the product being sold (food, certain medical products, etc.), the purchaser of the property (the U.S. Government), and the use of the product (in manufacturing or for resale), to name a few.Read more
History 101: State Taxes
Happy President’s Week! In light of the holiday, we thought it would be fun to chronicle the history of some relevant state tax legislation enacted and court cases decided during the terms of notable presidents. Here are three important state tax milestones with which to be familiar.
1959: Passage of Public Law 86-272
President: Dwight D. Eisenhower
Congress enacted this state tax law to protect companies selling across state lines by providing a safe harbor for income tax purposes. Although it was originally slated to be temporary, the law still prohibits a state from imposing a net income tax on an out of state corporation if the corporation’s only in-state activity is the solicitation of orders. Orders must be for tangible personal property, where orders are sent outside the state for approval and are filled from inventory stock held outside the state. If a company engages in services in the state, the protection of P.L. 86-272 is lost.Read more
Focus on Washington D.C.
Washington D.C. is technically not a state, however in some ways it is treated like one and in others not. The 23rd Amendment gave citizens of the District the right to vote in presidential elections and three votes in the electoral college. However, the District has no voting representation in Congress. It does have tax requirements as well. Regardless, of how the District is treated it is still a part of our country, so for this month we decided to focus on our nation’s Capitol!
Business Climate
With an area that is dominated by United States historical landmarks there’s no surprise that tourism would be a huge staple to the District’s economy. Some of the popular attractions include the Smithsonian Institution, national monuments, and memorials for notable US presidents and previous wars. In 2013, the District had over 19 million visitors and tourism spending reached $6.69 billion. There are over 75,000 people employed within the tourism industry that earn $3.65 billion in wages. The District forecasts that tourism will continue to grow in the upcoming years.
While there are other prominent and growing industries in DC, one of the most obvious ones is the government sector. At the end of 2014, 31% of the total jobs in the District were government related. Some of the biggest federal employers in the area include the Department of Defense, Department of Health and Human Services, and the Department of Justice.
Online Sales Tax Draft Circulates in House
We've got more Internet sales tax news! You may recall that the Marketplace Fairness Act, which would allow states to collect sales tax from purchases made online, passed in the Senate in 2013 but never made it to the House floor. At the end of the 2014 session, House Speaker John Boehner voiced, "significant concerns about the bill," and tabled it indefinitely.
Although it sounds like the Marketplace Fairness Act is dead, the topic of Internet sales tax is far from over. House Judiciary Chairman Bob Goodlatte circulated a discussion draft about online sales tax that is meant to be a way to re-start the conversation.Read more
