Special 2019 Financial Update: Don’t Let Ignorance Kill Your Business!
Internet sales tax collection, new labor laws, the Tax Cuts & Jobs Act … what do they have to do with your music retail business? Everything, in fact. And in 2019, they’re likely to impact you—big time. These new federal and state laws can be complicated and confusing, and ignorance and non-compliance could put your music store in financial peril. Fortunately, these potentially disruptive events can be prevented with a little proactive financial management.
Join music retail financial gurus Alan Friedman and Daniel Jobe of Friedman, Kannenberg & Co. for this exclusive financial training, and discover how to withstand the new rigors of 2019. The always-entertaining Friedman and Jobe will give you the rundown on these new laws and critical information to protect yourself. Don’t go into the new year without this information! Join Friedman and Jobe for a special NAMM U super-session, and find out what you need to know.
Do you have a question for Alan and Daniel that you'd like them to address during the session? You can submit it here.
A Brief Interview With Alan and Daniel
1. What’s new with internet sales tax, labor laws, tax cuts and the Jobs Act?
Literally everything is new with respect to these three tax law topics. The start of 2018 began with the implementation of wide-sweeping changes to our federal tax laws, now known as the Tax Cuts and Jobs Act—or TCJA. These changes range from a lowering of tax rates, both corporately and personally, to the elimination of longstanding deductions like personal exemptions, unreimbursed employee business expenses and limitations on both income/property taxes and home mortgage interest.
Just as taxpayers were trying to understand the impact of these new tax laws on their pocketbooks, in April 2018 the California Supreme Court—a powerful lawmaking body that typically paves the way for other states to follow—enacted new, definitive legislation on worker classification. With the implementation of their ABC test, many employers will now be forced by this new law to treat workers as employees, with all associated costs, instead of as independent contractors.
And as if that wasn’t enough, in June 2018, the U.S. Supreme Court handed down what is now known as the Wayfair Online Decision, which finally paves the way for states to force out-of-state merchants to collect and remit sales tax for sales into their state. Yes, this will level the proverbial playing field between online merchants and brick-and-mortar retailers, as well as serve to be a huge revenue-generating victory for most state tax authorities. But it will also potentially cause a crippling administrative compliance burden for retailers whose business models are built on online sales and other revenue generated from out-of-state customers.
2. Why is this so important for music retailers to know?
No matter where a U.S. music retailer operates or lives, we’re all subject to the same federal laws. Our music store clients across the United States have understandably been asking, “Will the new federal tax laws benefit me?” Our answer is the same for them all: “It depends.” It depends on whether you’re a high-, mid- or low-income earner. It depends on whether you live in a region with high state and/or city income tax rates. It depends on how much mortgage debt you have. It depends on whether you own a business, what kind of business it is, the net income it annually produces and whether you pay W-2 employee wages.
Given the continued growth in online and catalog sales for both online and brick-and-mortar music retailers, ignorance of sales and use tax laws could potentially cause more financial harm than the most heinous federal tax audit. And knowing music retailers traditionally hire music teachers, piano tuners and movers, band and orchestral instrument repair technicians, and sales staff for special events, the continued classification of these workers as independent contractors—when they should otherwise be classified as employees—could cause a music store irreparable financial harm in the event of a labor audit.
3. What will attendees get out of this session?
On one hand, we don’t want to unnecessarily scare anyone who remains uninformed about these new laws. On the other hand, they should be scared by remaining ignorant of these laws. The whole reason why these new laws have been enacted is to close tax loopholes, ultimately generate tax revenue and unfortunately punish those who do not comply with penalties and interest over extended tax periods. Over the years, we’ve encountered music retailers seeking our counsel after a federal tax audit or sales and use tax audit or state labor audit has ensued, as the music retailer finds themselves in some unexpected hot water for not complying with existing tax law. This audit trend is only going to get worse, as states are broke and know a surge in tax audits is one of the easiest ways to help fix their revenue woes—at the taxpayer’s expense. Accordingly, the only way a business owner can combat and survive an unexpected audit is to make sure they comply with these tax laws and ultimately prevail in the event of an unwelcome audit. Frankly, knowledge and tax compliance are the goals of this session.
4. Is there anything a music business owner can do now, before The NAMM Show, to prepare for these changes?
Yes, for sure. Owners need to become more aware of these new laws and determine the applicability of these laws on their own businesses, and they need to do it now. This goes for all music industry businesses too. Think about it. The issue of proper worker classification applies to nearly every music business, whether you’re a brick-and-mortar retailer, online merchant, catalog house, music product manufacturer or distributor, recording studio, musician, band, music school or music industry supporting business. We don’t expect business owners to become experts on these laws—that’s what professional tax advisors are for. But every owner needs to advocate for themselves by taking the steps necessary to protect their business and those who rely on its continuity and success.
Accordingly, members of the music industry should be seeking tax advice to determine how each of these new laws will affect their business. They should also be educating themselves from reputable sources, such as CPA firm webinars, state tax websites and other pertinent online content. Lastly, they should be making room in their trade show calendar to attend industry-specific education, like this program and the other NAMM U educational sessions found at every NAMM Show. These valuable resources are just a few of the many ways business owners can prepare for the compliance challenges these new laws will bring in 2018 and beyond.
Please read the legal disclaimer about this educational session and other NAMM U educational programs.