10th issue & a present for you 🎁

Happy Sunday trash nerds!

This is the 10th issue, and I want to give you all a special gift for your support. I was told not to but I want to.

This is the ultimate guide that will save you thousands of dollars and hundreds of hours for absolutely free: The Ultimate Sales Tax Guide for E-commerce Businesses.

It includes nuggets for digital service and SaaS businesses too.

I appreciate your continued support, you make my Sundays special - will keep dropping some presents for you all along the road to 💯

Time for today’s trash dump…

• New Tax for Canadian Businesses 💰

• Changes ‘round the states 🚨 

• Best state(s) to start a business 📍 

• Meme of the week 😂 

• Partner Spotlight: Entreprenista 🤝 

• Q from you - “How far back can I be audited?” 🙋‍♀️

✏️ Canadian businesses, new tax for you

Starting January 1, Canada is introducing a new Digital Services Tax (DST) of 3% on revenues despite concerns from local businesses and US opposition.

Here are both sides of the table:

Pros:

1. Revenue Generation: DSTs offer governments a way to generate revenue from digital activities that may not be adequately captured by traditional taxation methods.

2. Targeting Larger Tech: These taxes often target larger multinational tech companies ($800M+ Global + $15M Canada), potentially addressing concerns about their tax contributions.

3. Leveling the Playing Field: DSTs might help level the playing field between traditional and digital businesses by ensuring a fair contribution to public finances.

Cons:

1. Profit Ignorance: DSTs ignore a company's profitability, potentially leading to higher effective tax rates for businesses with lower profit margins.

2. Complexity: Determining the revenues subject to taxation can be complex and prone to disputes.

3. Trade Tensions: Unilateral implementation of DSTs can lead to trade tensions between countries, particularly if major trading partners feel targeted.

4. Incentives for Behavior Change: DSTs will prompt companies to alter their business strategies to avoid or minimize the tax impact.

5. Impact on Innovation: DSTs will hinder innovation and digital entrepreneurship by imposing additional financial burdens.

While Canada's DST proposal addresses the need for digital taxation, its unilateral approach and departure from international efforts highlight the complexities of balancing fair taxation with global cooperation in the digital age.

🚨 Goin’ around the states 🚨 

Selling food in Colorado? The state has made the decision that food products sold by an out-of-state company for home consumption are tax exempt… because the food requires additional home preparation.

Businesses selling in Utah - if you are selling “annual memberships", they are now taxable and should be paid by members. This will be treated the same as “season passes”…. so if you don’t start charging your members, it’s coming out of your own pocket 💵 

If you are leasing out items in Michigan, as the lessor, you are responsible for paying the sales tax on items considered tangible personal property. Not your lessee!

📍 Best state to start a business   

Want to know the best state to start your next business?

If you don't do this, you'll miss out on savings & gains.

Try Delaware.

1. No state sales tax: reduces admin work & creates more affordable products / services

2. Low property tax rates: lower expenses on commercial properties, more to invest in growth

3. Strong asset protection: helps safe guard business owners from personal finances / assets

4. Business-friendly laws: flexible legal framework and extensive case law to navigate corporate matters effectively

5. Ease of incorporation: well-established infrastructure to support rapid registration with little to no hassle

6. Access to a strong network: vibrant business & entrepreneurial community to connect with like-minded individuals, investors and mentors

….and of course the delicious seafood is always a plus! 🦀

If Delaware isn’t your jam… try Nevada, Wyoming, Texas or Florida. Solid second options, just not as good as Delaware.

😂 Meme of the week 🤣 

🌟 Partner Spotlight 🌟

Entreprenista is a media company, podcast network and membership community dedicated to celebrating the stories of women founders & leaders, and sharing lessons learned from founders who are paving the way forward.

Interested in joining? Just reply to this email and I can make a direct intro.

🙋‍♀️ You ask, we answer 🙋‍♂️

Q (Poorvi): How far back can I be audited?

A: The statute of limitations for a sales tax audit varies by state, usually three to six years. This means that most state tax statutes have the right to go back and review your records for up to six years.

Therefore, it is important to keep accurate records to expedite the audit process and avoid potential penalties for non-compliance.

More businesses have been recently getting impacted by failing to maintain adequate books and records.

Struggling with Sales Tax?

If you still have questions or concerns, a team of sales tax experts can provide you with a free consultation (typically $300/hr).

If you want to understand your liability exposure, these experts will run a free sample audit (~$5,000 value) for Trash Talk subscribers.

Get sales tax off your plate today!

Thank you for reading along. I’ll be back next Sunday with more sales tax shenanigans.

If you enjoyed this one, please share it with your network. 🤝

If you caught a laugh, reply back and let me know. I live for the people.

If you have any feedback, suggestions or questions, please let me know by responding to this email or DM me on Twitter or LinkedIn.

Until next week’s 🗑 …

Rohit