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INTERNET TAXES

Saying that the internet has changed the way we live is an obvious statement. The internet has transformed our forms of communication and our use of language as well as the way we conduct business. However, the one thing that has not changed is our duty to pay taxes which includes paying tax on some online purchases.

The current Arizona law is that if a business has a physical presence such as an office, warehouse or even a sales representative in Arizona, then the business owner must collect Arizona sales tax on internet sales to Arizona customers. But, a business that is based out of Montana for instance, which has no physical presence in Arizona, does not have to collect sales tax from Arizona residents. Montana, along with Alaska, Delaware, New Hampshire, and Oregon, is one of five states with no state sales tax. Generally speaking, if you are selling goods or products over the Internet to customers located in those states, sales tax for those customers should be a non-issue.This puts out-of-state businesses at an advantage when selling to Arizona customers.

There is an argument in favor of an online tax to be charged by all businesses: in-state businesses are forced to do business at a competitive disadvantage because they have to collect taxes and out-of-state online sellers do not, which can be up to a 10 percent price advantage, according to www.marketplacefairness.org and supporters such as Amazon.com and Overstock.com. A general online sales tax would affect online and catalog consumers because of the cost increase of the product due to sales tax. Many consumers probably never noticed whether they were paying tax for online purchases because they are used to paying sales taxes for other purchases. So the online sales tax issue is more likely one that businesses should keep an eye on because it will likely affect business in the not so distant future.

SUMMARY OF 10 TIPS FOR SMALL BUSINESSES

I hope everyone has enjoyed my monthly tips over the last year for those who own, or want to own, a small business .  I thought as a closing for this series that I would summarize the tips in a one-page document that you can take with you and refer back to when you need a reminder.

First Tip: Create your corporate shield to “shield” you as an individual from liability by creating a corporation or a limited liability company for your business.

Second Tip: Get appropriate business insurance (worker’s compensation, unemployment, business liability, professional liability, health, etc.) and pay taxes.   

Third Tip: Do not misclassify your employees as independent contractors; do an analysis of the type of work, supervision, tools/equipment, control, etc. of your “independent contractors” to ensure they have not been misclassified.

Fourth Tip: Know the employment laws that affect your business such as Title VII, Equal Pay Act, Age Discrimination in Employment Act (ADEA), Americans with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), worker’s compensation standards and Arizona state laws.

Fifth Tip: Set written employment policies in an employment handbook, consistently follow your own policies, and train your supervisors on how to implement your company policies.

Sixth Tip: Make sure you are promoting your employee benefits to your company’s advantage and do not forget the benefits that you can offer that do not cost you anything.

Seventh Tip: Make sure you have written contracts that lay out the true terms of the contract and avoid “handshake deals” which can create serious problems for your business if you end up in court.  

Eighth Tip: Integrate written social media policies into your workplace such as prohibiting employees’ use of social media at work, employees posting your company’s confidential material, trade secrets, or proprietary information, etc. 

Ninth Tip: Determine if you need a trademark or service mark for your business and if so, register your trademark or service mark with the United States Patent and Trademark Office (USPTO) to obtain exclusive nationwide ownership of the trademark and the presumption that the trademark is valid over others. 

Tenth Tip: Beware of personal guarantees because if you do sign a personal guarantee, you have to be willing to pay on the debt if the main borrower, whether it’s your business or your child, fails to pay. 

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown.

SIXTH TIP: EMPLOYEE BENEFITS

The next tip for those who own, or want to own, a small business: make sure you are promoting your employee benefits to your company’s advantage.  

There are many types of benefits that employers can offer to employees.  Insurance is usually the first one that comes to mind, such as medical, dental, vision, life, short-term disability, and long-term disability.  There are other benefits as well, which include:  paid sick; vacation and/or personal days; paid holidays; 401(k) matching programs; etc.  A small business owner’s main concern when deciding on what benefits to offer to employees is:  “How much is it going to cost me?”  This is a valid concern that has to be considered in conjunction with obtaining and retaining employees.  For instance, if you offer no benefits at all, will you continually have turnover with your employees because they are taking jobs elsewhere with better benefits?

I think small business owners sometimes forget to consider the importance of “employee relations” or the “spin” that can be put on what they have to offer their employees.   I am a mother of three young children and have learned the importance of the “spin.”  If I tell my kids they can have a “little bit” of ice cream for dessert, they cry and scream.  But, if I tell my kids I am giving them “a lot” of ice cream (especially if I put the ice cream in a small bowl), even though it’s the same amount I would have given them in the first scenario, they happily eat their ice cream.  The same rule applies in the workplace.  It may sound simple, but if you have staff lunches and the company picks up the tab for everyone’s lunch, promote that event as a “company sponsored” or a “company paid for” event.  Or, if you offer health insurance to your employees, consider letting the employees know how much you are paying to offer that benefit to them. 

And, don’t forget the benefits you can offer that do not cost you anything!  For instance, some employers offer their employees short or long-term disability insurance or identity theft protection.  These “benefits” are fully paid for by the employee, but the employee gets the benefit at a cheaper rate through a group plan offered via the employer.  The employer’s obligation only comes in deducting the premiums from the employee’s paycheck and transferring that money to the vendor.

At Hymson Goldstein & Pantiliat, PLLC, we have experienced employment law attorneys who can help you review your benefit policies to ensure they meet the needs of your company and your staff.

The information contained herein is general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat.

SECOND TIP: INSURANCE AND TAXES

The next tip for those who own, or want to own, a small business: get appropriate business insurance and pay taxes.  Several small business owners have come to me recently with questions about whether they should pay their workers as employees or independent contractors.  This issue, employees versus independent contractors, is one I will address in a later letter.  To understand this issue, you have to first understand why a small business owner would not want to have employees: having employees means having to pay more taxes and for more insurance.

An employer with employees pays its share of employment taxes to the federal and state governments.  Additionally, all businesses need insurance, but businesses with employees need more insurance.  Some of the typical insurances that a small business should consider, some of which are mandatory, are:

• Worker’s Compensation Insurance

• Unemployment Insurance

• Business Liability Insurance

• Professional Liability /Errors and Omission Insurance

• Medical/Dental/Vision/Life/Disability Insurance

Failing to properly pay taxes or get insurance can lead to, among other things, the IRS coming after you for back taxes, interest and penalties or your business having to pay out of pocket for an employee’s work related injury.  You would not want to get in to a situation where you open a successful business and that business is brought to its knees due to unexpected liabilities or losses.  Protect your business investment and assets with the appropriate and necessary insurance and payments to Uncle Sam.

Sincerely,

Lori N. Brown

The information contained herein is a business advertisement with general information not legal advice, and does NOT establish an attorney-client relationship with Lori Brown or Hymson Goldstein & Pantiliat, PLLC.

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