Attention to detail is critical when dealing with sales and use taxes, as personal liability can result even when conducting business as a corporation or limited liability company. The sales tax is an additional cost tacked on to purchases of tangible personal property and certain services. The use tax, however, is a compensatory tax paid directly by the purchaser when the seller doesn’t collect the sales tax.

Unfortunately, sales and use tax complexities are compounded in the construction industry. Sales of real estate typically are not subject to tax, but contractors are subject to tax on their purchases of tangible personal property that are subsequently incorporated into real estate improvements. Therefore, barring any special exemptions, both general contractors and subcontractors must pay taxes on the majority of their purchases.  

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In many locales, developers and environmentalists seem to be bridging their philosophical divide. Frustrated by legal costs and government inaction, they are turning to creative compromise as the best strategy for achieving their goals.

Changing Mindsets

More and more developers have been seeing that greener buildings can translate into healthier bottom lines. A study by California’s Sustainable Building Task Force found that, for example, an upfront investment of only 2% in green building design would result in an average future savings of 10 times the initial investment. (While the 2% cost figure is a rule of thumb, some buildings have qualified for green certification at no additional cost.)

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With the falloff in residential and commercial construction in many markets, some construction contractors have considered expanding their revenue horizons by investigating contracts funded by the American Recovery and Reinvestment Act of 2009.

However, locating, pursuing, and meeting the requirements of government contracts is vastly different from private sector work. Construction professionals should be aware of some of the key challenges and best practices of government contracting.

To get started, spend some time examining where contract dollars are spent in your area and which companies are winning contracts. The databases at www.usaspending.gov and www.fedspending.org contain a wealth of free information.

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For decades, small business owners, accountants, and others have argued the need for different accounting standards to be used by smaller, privately held companies as a replacement for the complex and burdensome standards issued by the Financial Accounting Standards Board (FASB). Opponents, on the other hand, have argued for only one set of accounting standards, pleading that multiple accounting standards could only lead to confusion and a lack of credibility for issuers of financial statements prepared under “lesser” standards.

Compelling arguments can be made by both camps, but the practical portion of the argument has, in recent years, tilted in favor of some version of “Little GAAP.” The continued proliferation of complex and controversial standards, some of which are costly and difficult to apply, has lead the American Institute of Certified Accountants (AICPA) and the FASB to increase their efforts regarding this difficult issue.

Two years ago, FASB established the Private Company Financial Reporting Committee (PCFRC) to address standards for private companies. The PCFRC recently issued a significant statement suggesting that the International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs) represent an “attractive alternative for U.S. private companies.”

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The Florida Department of Revenue (the Department) recently issued guidance on sales and use tax as it relates to specific rental arrangements. Issuing Technical Assistance Advisement 10A-026 on 06/07/2010, the Department addressed questions from related entities involved in a rental arrangement. In the scenario, a group of owners owns both an LLC, which holds the real property, and a Subchapter S corporation (the Taxpayer) which occupies the same property.

The owners claimed that, since both entities are owned by the same persons, and no formal lease exists, the LLC is not engaged in commercial rental activities. Further, since the structure only exists to secure financing, this relationship is not one of landlord/tenant and therefore not subject to commercial rental sales tax.

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The President recently signed into law the Homebuyer Assistance and Improvement Act of 2010, which extends the closing deadline for the Homebuyer Tax Credit to September 30, 2010. The extension comes in response to concern from buyers worried about filing closing paperwork by the prior July 2 deadline. As guidance from the IRS states, homebuyers still must have entered into a binding contract to purchase a home before May 1, 2010.

In addition to Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, homebuyers claiming the credit must provide the following documentation:

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The Hiring Incentives to Restore Employment (HIRE) Act provides qualified employers with a new tax credit for retaining certain qualified employees. This provision is intended to encourage businesses and tax-exempt entities to hire and retain employees, and is generally applicable for 2010.

CREDIT AVAILABLE
For each retained worker, a qualified employer’s general business credit is increased by the lesser of:

• $1,000, or
• 6.2% of the retained worker’s wages during a 52-week consecutive period

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The Hiring Incentives to Restore Employment (HIRE) Act provides a Payroll Tax Holiday for businesses that hire and retain previously unemployed workers. This provision applies to wages paid beginning after March 18, 2010, and ending on December 31, 2010.

Qualified employers are forgiven their 6.2 percent share of the “old age, survivors, and disability insurance (OASDI)” component of Social Security payroll taxes for qualified employees performing services in a trade or business.
A qualified individual is any individual who:

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• begins work for a qualified employer after February 3, 2010, and before January 1, 2011;

If your business has a foreign bank account or other foreign financial interest, you need to make certain that you comply with reporting rules because the penalties for noncompliance can be substantial.

U.S. persons with a financial interest in or signature authority over a foreign financial account are generally required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”) with the Department of the Treasury. The FBAR is due by June 30 for a foreign account in which the aggregate value exceeded $10,000 at any time during the previous calendar year.

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Your business may be eligible for the new Small Business Health Care Tax Credit. The credit, which was part of The Patient Protection and Affordable Care Act, is retroactive to tax years beginning in 2010 and is, therefore, available for the full calendar year of 2010 (for calendar year taxpayers).

Designed to encourage eligible small employers to offer health insurance coverage to their employees, the non-refundable credit is available to small employers that pay at least half the cost of single coverage for their employees.

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