January 7, 2012

 

*************

***********

Worker comp

***********

To Andy: While NY and NJ do have state run plans, one has to do some shopping for the best pricing. If you got a refund, you were paying too much. Lets face it, the state isn't gonna give you anything! As far as the NYSIF, I switched to another company because they could not explain what a line item was on my bill. I believe it was called an expense constant that varied from bill to bill. After many emails to the NYSIF....I RAN. My premium went down 1,000/year. You really need to look around. NYSIF is a joke!

Mike

CSS

************

Comment from tax expert

************

Ken,

Regarding sales tax issues, each state has its own tax code and what is taxable in some states may or may not be taxable in others. Most states impose a Sales and Use tax on materials and sometimes labor. When you are dealing with this type of tax, states can tax the transaction (the sale) or the use. A state may tax materials but not labor. Some states tax residential installations in a different manner than commercial work. Some tax new construction differently than rennovation. The form of your installation or service agreement may make a difference. For example, many states tax materials upon final sale if the invoice is itemized (i.e. the individual materials are shown on the invoice). In the case of an alarm system sale in one of these states, the tax would be due on the final sale price of the equipment and would be collected by the alarm company from the customer. In these states the alarm company is considered the user if the invoice is a flat fee invoice (i.e. "alarm system $$$"). In this case the alarm company pays the tax on the equipment to the distributor. It is very important to consult with a tax professional that is familiar with the laws in the state in which you are conducting business. Many companies try to apply logic to tax issues and I can tell that after working with the IRS and various other taxing authorities for 30 years, there is very little logic to the tax codes. We have alarm company clients in 36 states so we spend a good deal of time researching state and local tax codes as a mistake can be very expensive.

On the S versus C corporation election, if the advice is coming from a competent tax practitioner, he or she is most probably right. As Ken and I have said numerous times, an S corporation is the best solution almost all of the time, and any closely held company operating in the security business should seriously consider making the election, but remember the most of the time cavaet. There may be reasons not to convert, or issues that have to be resolved before making the election. The election is fairly simple, but consult with your tax advisor before jumping in.

Mitch Reitman

S.I.C. Consulting, Inc.

************

To DAVE at Security Alarm: Ask your accountant if he's ever sold an alarm company or had a client who has sold an alarm company. You need to FULLY understand the ramifications of changing from an S to a C corp. Few people do it and there are few good reasons to do it. If you go to sell your company and are a C corp, you'll be taxed TWICE on the money. I would 1) get a more experienced accountant and/or 2) Talk with an attorney who has helped buy and sell companies and/or 3) talk to The Davis Group or another business brokerage firm that can advise you on how things work when you go to sell.

There might be some benefit to switching to a C corp now, but if you ever plan to sell, make sure your accountant knows that this possibility is in your future.

David L. Myers

Myers Protection Services

Indianapolis, Indiana