This week is Maryland’s back-to-school sales tax holiday, which allows consumers to purchase qualifying clothing and footwear tax-free, so long as the purchase price for the items are $100 or less. It’s not necessarily marketed by the Comptroller as being a “back-to-school event,” but many shoppers will take advantage of the tax-free week to purchase items such as new sneakers and jeans for their kids’ upcoming school year. Sales tax holidays have been around for over 30 years, but many question whether these temporary tax respites are sound tax policy.
Proponents of sales tax holidays claim that the programs provide benefits to low-income consumers and provide a stimulus to the economy through increased sales. Clearly, low-income consumers are getting a tax break, albeit temporarily, but wealthier consumers making qualified purchases receive the same benefit. In addition, low-income shoppers may not have the necessary cash on hand to time their purchases to occur during a small time period. Further, after perusing the list of exempt items in Maryland’s program, it’s easy to find one item that most families will need to buy this time of year that is not exempt from tax under the program. For example, backpacks are not exempt during the sales tax holiday, but you’re in luck if you looking for a new fishing vest or some lingerie, which are exempt during the holiday. Virginia’s recent holiday did provide for an exemption for backpacks, but only if the price was $20 or less. Good luck finding a backpack for $20.
Synergy Enterprises Incorporated (SEI), based in Silver Spring, MD, is a small business that embodies the American Dream. Founded by naturalized citizen Prachee Devadas in 2003, the company has grown from one to over 110 employees. Starting a company in her home, Mrs. Devadas probably never guessed that she would end up providing services to agencies like the Departments of Education, Homeland Security, Health and Human Services, Defense, Energy, Transportation, and more…or that she would end up in the Oval Office advocating to the President for small government contractors.
Entering the government contracting sector seems especially enticing during a recession. While contracting may be a good fit for your business, make sure you’re aware of the unique aspects of dealing with the government.
Government contracting is big business in the Commonwealth of Virginia. Federal procurement spending in Virginia across all agencies totaled $53.9 billion in 2008. Historically, some have considered federal government work to be a safe haven during uncertain economic times. While profit margins on government contracts are relatively low, Uncle Sam tends to be a reliable and potentially long-term customer. During the current recession, the lack of private sector work combined with “stimulus” spending under the American Recovery and Reinvestment Act of 2009 (ARRA) is causing some companies to consider government contracting. Many of these companies are small businesses. Contracting with the federal government imposes requirements on companies not commonly found in the commercial market. By and large, the government is spending taxpayer dollars. Understandably, the government requires much greater visibility into how dollars are spent than is typically required in the private sector.
Read entire article at VSCPA site for an overview of some of the unique aspects of government contract accounting and the challenges that commercial companies will encounter as they move into the government market.
Tom Marcinko and Bill Foote, CPA, are with Aronson & Company, a nationally ranked top-50 accounting and consulting firm. As a member of Aronson’s Government Contracts Services Group, Tom assists clients with both pre- and post-award contract administration, compliance and other regulatory requirements. Bill serves as an officer in the firm’s Forensic & Valuation Services Group, where he assists government contractors with valuation projects and contract disputes. He is also a member of the VSCPA Editorial Task Force. Contact Tom at firstname.lastname@example.org and Bill at email@example.com.
The Administration raised the stakes for contractors or grantees that receive stimulus funding but fail to file the required reports. The American Recovery and Reinvestment Act requires quarterly reporting but did not include consequences for those recipients who fail to submit reports. During the last calendar quarter of 2009, more than 1,000 recipients failed to file reports, most of them grantees as opposed to contractors.
On April 6, 2010 President Obama directed Executive Agencies to use every means available to ensure that every recipient of stimulus funds has filed the required reports. The agencies must intensify their efforts to ensure compliance by terminating awards, pursuing suspension and debarment, reclaiming funds, and initiating other punitive actions whenever authorized and appropriate. Agencies are also required to report the names of non-compliant recipients to the Office and Management and Budget (OMB)along with the actions the agency is taking to obtain the reports. OMB also has 30 days to provide agencies with additional guidance on how to handle non-reporting recipients.
It was presumably good news when your organization received some of the stimulus money. Do not turn good news into bad news by failing to file the required reports.