Are “Amazon Tax” Laws Backfiring on States?

So Says The Tax Foundation

via The Tax Foundation

Citing significant budget shortfalls and the inability to collect sales taxes on many Internet-based transactions, a number of states are considering the adoption of “Amazon taxes.” Such laws, nicknamed after their most visible target, require retailers that have contracts with “affiliates”—independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business—to collect the state’s sales tax.

Contrary to the claims of supporters, Amazon taxes do not provide easy revenue. In fact, the nation’s first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue. For instance, Rhode Island has seen no additional sales tax revenue from its Amazon tax, and because Amazon reacted by discontinuing its affiliate program, Rhode Islanders are earning less income and paying less income tax.

Amazon taxes also do not “level the playing field” between brick-and-mortar and online businesses; the laws actually mandate disparate burdens on online businesses. Litigation over the constitutionality of Amazon taxes is ongoing, with scholars on the left and right disputing their wisdom and legality.

Enacting an Amazon tax law also sends a signal of hostility to businesses engaged in interstate commerce, runs the serious risk of retaliation from other states and from affected businesses, and undermines efforts to improve the uniformity of state sales taxes.

Key Findings

Unconstitutionally expansive nexus standards like the Amazon tax undermine legal certainty, burden interstate commerce, and harm economic growth.

Get the full report – FREE DOWNLOAD from The Tax Foundation

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Posted on March 10, 2010
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Recession Flattens Accounting Firms in ‘09

No fee growth across all sizes of firm

Rosenberg

By Marc Rosenberg, CPA

The mantra in 2009 was “flat is up,” which meant that CPA firms would gladly settle for 2009 revenues that simply held firm at the 2008 level, given the full brunt of the recession. According to a survey we conducted of CPA firms across the country, firms got their wish: The surveyed firms showed a 0.6% increase in annual net fees in 2009 vs. 2008 – about as flat as it gets.

For the past 10 years, we have maintained what we call our “National E-mail Managing Partner Roundtable.” It consists of roughly 100 accomplished managing partners of CPA firms across the country. 54 firms responded in January and early February to a series of questions regarding the impact of the recession on their firms.

Interestingly, there was very little variation in responses between the three different size groups.

2009 vs. 2008

Fees were flat across all size ranges. The good news is that the ability of CPA firms to be somewhat recession-proof prevented the dreadful losses experienced by many industries due to the world economic crisis. The bad news is CPA firms aren’t used to flat growth, having experienced double-digit growth rates for most of the post-Enron/Andersen years. Yes, they got their wish to stay even with 2008 but it did little to ease the pain of laying off staff, cutting costs and dealing with clients who suffered enormously from the recession, the latter of which took its toll on firms’ accounts receivable, work-in-process and billing rates.

Income per partner was down 2.5% in 2009 vs. 2008. Most of this income decline was due to the late start most firms got in right-sizing their firms to the current year’s fee volume. Because the majority of layoffs and cost cutting moves were made toward the end of the 2009 tax season and soon after April 15, firms were over-staffed during a portion of the revenue year. Somewhat offsetting this was the fact that the tax season is the busiest time of the year, so being overstaffed didn’t hurt as much as being overstaffed outside of the tax season.

2010 vs. 2009

Fees are projected to increase in 2010 by 3.0% across all size ranges. 3% is certainly better than flat growth, but it’s a far cry from the Golden Age that typified the years since the Enron/Andersen fiasco. So clearly, firms are coming out of the slowdown and seeing light at the end of the tunnel. But the tunnel is long, and 2010 will be a sluggish year. Income per partner is projected to increase 5.8%, with the $10+M firms expecting a 7.5% increase. The right-sizing done by firms, both at the staff and cost control fronts, will pay off in 2010.

Lay-offs in 2009

Our 54 firms were perfectly split on this: 50% laid off staff in 2009 and 50% did not. But when we look at the results by size of firm, we get a different picture:

Smaller firms had the most difficult time finding staff, so they were less over-staffed when the recession hit. The larger firms enjoyed a bigger boom than the smaller firms from 2002 to 2008 and hired as many qualified staff as they could because they were confident of getting new revenue to keep them busy. When the recession hit, the larger firms were more exposed than the smaller firms.

Have firms seen a meaningful increase in the quality (not quantity) of staff available in the market?

This is one of the most curious issues I have seen during the past 18 months. For the first time in 15 years, there is a bountiful supply of experienced staff available for hire. Some firms claim that these are the weak people who were let go by firms and, therefore, are not worthy of being hired. But more firms found the opposite, according to our survey: Overall, 65% saw an increase in the quality of available staff and 35% did not. A breakdown of these results by size range is revealing:

So, the larger the firm, the less likely it was to see a meaningful increase in the quality of staff available for hire. This makes sense because, generally speaking, the performance bar is set higher at larger firms than at smaller firms.

Did the firms hire these newly available staff?

60% said yes and 40% said no. This is pretty amazing: despite the fact that firms were reeling from the recession’s impact, as they were laying off staff, they were hiring new people. The combination of the recession and the industry’s staff layoffs enabled many firms to do something they had wanted to do for years: upgrade the quality of their staff. Until the fall of 2008, practically all firms were forced to lower their standards for hiring and retaining staff because they were desperate for labor, any labor.

Hiring plans for 2010

Clearly, the smaller firms are more conservative. The larger firms are more aggressive.

Only 9% of the 54 surveyed firms plan to lay off staff in 2010. This compares to 50% in 2009.

Spending marketing dollars in the recession years

Conventional wisdom says that in down years, firms need to increase their marketing commitment because they have to work harder to grow. 2009 was such a tough year that a lot of firms did not increase their marketing expenditures. But with the recession showing signs of ending, 2010 looks like the year firms will commit to marketing in a more conclusive way.

2010 2009
Firms increasing their marketing expenditures 62% 44%
Firms decreasing their marketing expenditures 2% 26%
Firms reporting this the same for both years 36% 30%

.

Recession’s impact on firms’ strategy for merging in smaller firms

Some industry pundits opined that with a recession, the intense merger market would cool off. The thinking was that buyers were hunkering down to focus on their own problems and sellers were temporarily pulling out of the merger market until they could post stronger profit numbers to drive a better bargain.

Based on our survey, the above didn’t happen. Only 4% of all firms held off on mergers. 32% said they were continuing to pursue mergers as in the past and 64% reported no change from the prior year. The “no change” could be that those who were pursuing mergers continued to do so, and firms that were not pursuing mergers continued to stay out of the merger market.

Tactics and strategies to weather the storm

The following actions were being taken by firms (the number in parenthesis is the number of firms citing the same response):

The following were only cited by one firm, but they are excellent ideas nonetheless:

Marc Rosenberg, CPA, is a management consultant to CPA firms nationwide. For the past six years in a row, Accounting Today magazine has acknowledged Marc Rosenberg as one of the 100 most influential people in the CPA profession. INSIDE Public Accounting recognized Marc as one of the most recommended CPA firm consultants in the country. Rosenberg is a widely published consultant. His articles regularly appear in all the industry’s leading journals. He works with firms in partner compensation, retirement and succession planning, mergers, facilitating retreats, strategic planning and practice management reviews. His firm, The Rosenberg Associates, is based in Wilmette, IL. You can reach him at (847) 251-7100 and at marc@rosenbergassoc.com.

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Posted on March 9, 2010
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Top Five: Secrets of a CPA Start-Up

In the suburbs of Washington, D.C., an ex-Army intelligence specialist is breaking the mold for accounting firms and inventing new ways of doing business.

by Rick Telberg

Maybe it’s the four years he spent in Army intelligence at the Pentagon. Maybe it’s the influence of a CPA uncle in San Diego. Maybe it’s the entrepreneurial father who, as a part-time magician, established a Guinness World Record for fire-eating.

Brian Wendroff

But 30-year-old CPA Brian Wendroff wants to break the mold for accounting firms.

In his version of a CPA firm, the four-year-old Wendroff & Associates in Arlington, Va., is modeled more on the strengths of a technology company than a traditional professional services firm.  In his firm, he’s working on the kind of new product development, speed to market and customer feedback loops employed by the best software developers. In his mind, he’d rather be less like a KPMG and more like a Microsoft.

“Like a software company,” he says, “we’ve got to come out with upgrades every year, new versions with features that the customer tells us they want to see.”

So far, Wendroff & Associates LLC of Arlington, Va., may only be on version 1.1. But for a young firm, that’s not bad. From a book of business starting with ads on Craigslist and energetic networking through BNI, Brian Wendroff now counts seven accountants and two interns in his firm, plus his brother Darren, who manages marketing and communications. The firm is doubling in size every year. “The Web is our number two source of leads,” says Darren, “right behind client referrals.”

Together, Brian and Darren Wendroff are working to innovate every aspect of how an accounting firm works. Take just five examples of their leading edge strategies:

  1. Adopting flexible and supportive human resources policies — The firm’s tele-work policy was put in place to support a healthy work-life balance and to attract and retain the best talent for the money. But it also came in handy during the “snowpocalypse” that hit Washington in February, which otherwise might have ground their tax season to a halt.
  2. Pursuing Web- and cloud-based business solutions — The firm is a pioneer in QuickBooks Online and sits on an Intuit advisory board. Their CRM system, Highrise, is all SaaS. And they manage many firm processes through Google Docs.
  3. Aggressive experimentation with social media marketing — Twitter has yielded five new clients in the last year, billing about $14,000 annually. And the firm picked up two more in January. The last time I checked @wendroffcpa, they had over 13,000 followers. By comparison, @PwC_LLP, representing the largest accounting firm on the planet, had about 3,700.
  4. Ruthless dedication to changing with client criticism — The firm sends out a client satisfaction survey twice a year, which is unusual enough. But they use the super-simple Net Promoter Score developed in part by Bain & Co. And they follow up with a memo to their client base baring the results and sharing their plans to improve.
  5. Practicing the “sow-before-you-reap” verse is the new age marketing Bible — The firm offers free “Ask-a-CPA” Webinars on basic accounting or tax tips for clients and non-clients alike.  For business owners with at least $2 million in annual turnover, Wendroff & Associates organizes CEO peer-to-peer groups. “It’s a group where C-Level executives or business owners can talk frankly about issues affecting their organizations,” Darren says. “We wanted to join a group like this, and couldn’t find one, so we created ours.” The meetings are invitation-only, highly structured, single-topic and followed by a memo to all, which actually reads more like a Harvard Business School case study than minutes from a meeting.

It wasn’t always this way. When Brian first started the firm, he admits his fees were set too low and he was attracting the wrong clients. Today, fees are set to cover overhead and salaries, plus enough to plow back into the business. And the firm is now getting the right kind of clients — the kinds who want more than just bookkeeping or tax prep, but want and need strategic services.

The proof? Wendroff says, “Nearly every company we worked with last year grew through the recession.”

Copyright 2010 AICPA.
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Posted on March 8, 2010
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Do you have clients in Massachusetts?

You may already be violating some new regulations.

Bradley (on the left)

New rules went into place March 1 requiring firms with customers in the state to follow a formal security plan against ID theft.

Do you hold key info about them like name and social security number? Then you may need a written security plan.

Don’t know what such a plan looks like? Susan Bradley (the CPA tech “Diva”) outlines the 16 steps you need to know in Massachusetts. And, as she says, you needed to know it March 1st.

Get the details at her always useful and entertaining “The Official Blog of the SBS “Diva.”

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Posted on March 8, 2010
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How Do Business Owners Define Success?

If you ask your clients, you might be surprised.

How do accountants define success? Join the survey, get the results.

Accountants often define success in terms of revenue, net income, or maybe client service. But the Enterprise Council on Small Business surprisingly found that “satisfaction” was the primary way that they defined success, followed by “growth.” They asked business owners to define what satisfaction means to them. Business owners said maintaining a healthy work/life balance was the single biggest factor in their definition of success.

Keep that in mind when you’re considering how to help your clients achieve their goals. Their goals may not be what you think.

“Also,” the researchers say, “give some thought to the types of promotions or contests you are running for small business owners. Not all rewards need to be business oriented, and for those looking to achieve more work/life balance, giving them rewards for their personal life can be a strong indicator of your commitment to helping them achieve this.”

How do accountants define success? Join the survey, get the results.

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Posted on March 6, 2010
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Local Firms Feel Fee Pressure. And Now: Big Firm Competition

Like many CPAs across the nation,  firms in Toledo, Ohio, are reporting continued collection problems.

And now, on top of that, many small firms are getting competition from larger firms moving down-market at cut-rate prices

“Business has been good, but everything is getting stretched out,” said Chuck Mira, a partner in Mira + Kolena in Toledo, Ohio. “Cash is backed up through the system. “We would like to see national banks open up credit lines.”

Price

J. Clarke Price, president of the Ohio Society of CPAs, said, “I have heard around the state that 30-day clients went to 60 days or even 90.

“Collection is more of an issue, and some clients are saying, ‘You’ve got to work with me on the fees.’”

And for the first time in years, Clarke said, locally owned CPA firms are feeling competition from big national firms trying to pick up smaller clients.

via toledoblade.com.

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Posted on March 6, 2010
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Accounting Sheds 3,600 Jobs in February

Seasonally-adjusted workforce declined to 916,800 in February.

That’s 3,600 off from January’s 920,400 headcount, and the February 2008 level of 947,000, according to today’s employment situation report from the Labor Department Bureau of Labor Statistics for the accounting and bookkeeping sector.

Accounting and Bookkeeping Employment - February 2010

But February’s decline follows a revised gain in January of 4,600 jobs.

Overall, the number of jobs in the U.S. fell by 36,000 last month, and the unemployment rate held steady at 9.7%. The jobs picture was probably hurt by February snowstorms. Still, the rate of job loss may be slowing. Last February, by comparison, the U.S. economy lost 726,000 jobs. Analysts expect the economy to start adding jobs later this year.

In the offices of CPA firms, in particular, data through January shows a workforce of 400,400 people (not seasonally adjusted), down from 405,600 in December.

Total Employment at CPA Offices - January 2010

For the year, CPA firms employed 415,500 people, down from 433,300 in 2008, and off from the peak 420,200 in 2007.

But the big story may be in taxes.

For tax prep businesses, 2009 represented a (not seasonally adjusted) gain to 114,000 annual workers, a new annual record, up from 2008’s 110,800.

Tax preparation offices

And in January the tax sector bulked up with a workforce of 251,600, also a record, and a huge leap from the year-ago 208,000 roster.

Payroll Business Decline

Payroll services showed  a (not seasonally adjusted) roster of 139,600 in January, down from 147,300 in the year-ago month. And for the full year 2009, payroll shops employed 151,100 workers, down from 167,500 in 2008 and off the record 169,200 in 2007.

Payroll Services

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Posted on March 5, 2010
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