The Fixer and The Preventer

At my house, I often refer to myself as "the Fixer."  Why?  Well, I live in a house full of girls (my wife, two daughters and a shitzu).  As most men encounter, they often have a "honey do list" that accumulates over time.  However, on a weekly basis there seems to be things that constantly need attention, maintenance or "fixing."  Examples may include:  cell phones not working properly, computers not working properly, IPads, toys, etc.

Every family needs a "fixer" (whether it is male or female).  Someone who can fix almost anything because unfortunately, everything in this world seems to be made to break down at some point.  Everything needs constant maintenance or "fixing."

In the state and local tax world, this seems to be the case as well.  Every day represents a new court case, new legislation, new business decisions, new fact patterns, and lovely audits and notices, etc.  Constant change is inevitable.  Constant change can lead to problems and issues that require maintenance or "fixing."  Hence, every company needs a state and local tax "fixer."  Someone who can provide leverage when it is required.  Someone who lightens the burden, and is a strong advocate when needed.  Someone who can identify the right-size, most cost-effective and practical solution. 

The key to being a good "fixer" is also being a good "preventer."   The more problems you can prevent, the less problems you will have to fix.  Hence, a good fixer will be as proactive as possible instead of just reacting to the constant "nagging" or "fire drills" that pop up.

Do you have a "fixer" at home?

Do you have a state and local tax "fixer" and "preventer" for your business?

State Taxes and The Compound Effect: Ticking Time-Bomb or Nest-Egg?

Some things change and some things remain the same.  Unfortunately, a lot of the time, the things we want to change, remain the same (and vice versa).  Hence, what can we do about it?  How can we change something, improve, and get the results we desire? 

I recently read a book that I want to encourage you to read as well.  It is called, "The Compound Effect" by Darren Hardy.  It is a great book about how small actions, small differences in behavior or small changes can make a big difference over time. 

I'm sure most of us are aware of the compound effect when it comes to money, i.e., the earlier you start investing in your 401k, the bigger the "pot" in the future.  Well, the same principle applies to any area of your life that you want to change, whether it is relationships, your fitness level, finances, career, etc. 

Small changes made today and every day (completed with consistency) will produce big results at some point in the future.  Consistency is the key.  Hence, you have to have the perseverance and discipline to stick with the small change you are making on a daily basis so you see the result in the future.  The biggest reason people don't get the results they desire is because they give up too soon. 

How does this apply to state and local taxes?  Well, small errors, or areas of neglect (such as nexus, apportionment, intercompany expenses, etc.) can add up over time.  If no action is taken, an audit, a nexus questionnaire, etc. can arrive at your doorstep and the liability can be much greater than if action had been taken years earlier. 

On the flip-side, if action is taken today (i.e., restructuring, voluntary disclosure agreements, planning, etc.) cash tax savings can be achieved not only for one tax year, but on an annual basis creating additional funds (or "nest-egg") to be used in your business.

The compound effect is a great principle.  Just make sure that it is producing a "positive" effect for you and your business, instead of a "ticking time-bomb."

I leave you with this question from the book, "The Compound Effect:" 

"If you were given a choice between taking $3 million in cash this very instant and a single penny that doubles in value every day for 31 days, which would you choose?"

Read the book to learn the answer.

Trademarks and Tradenames: NOT Enough to Create Nexus (This Time)

The West Virginia Supreme Court of Appeals ruled that products bearing a company's trademarks and/or tradenames is not enough to create nexus for the out-of-state company, if that is its only activity in the state (if you call that "activity in a state"). 

Specifically, the West Virginia Supreme Court of Appeals has affirmed a trial court decision that a foreign licensor with neither physical presence nor substantial economic presence in-state had no nexus with West Virginia, so that the state's imposition of its corporation net income tax and franchise tax on the licensor's royalties earned from the nationwide licensing of food industry trademarks and trade-names would be invalid because the tax assessments satisfied neither the "purposeful direction" test under the Due Process Clause nor the "significant economic presence" test under the Commerce Clause. State Tax Commissioner v. ConAgra Brands, Inc., W. Va. S. Ct. App., Dkt. No. 11-0252, 05/24/2012

What if the Court ruled in the state's favor?  What impact would that have had on your company?  Think about it.

This case shows that states continue to push "economic nexus" theories, bright-line tests, thresholds, etc. way past the physical presence standard.