The Colorado Chamber’s Colorado Manufacturing Initiative
What are Manufacturers Worried About?
Manufacturers face a variety of challenges in the course of doing business. Whilst many can get help from companies like Your Company Formations Ltd to help them get started, there are other factors to consider after that. Everyone knows that starting up a business isn’t just a walk in the park, there is a lot that they will need to think about to get their business up and running. Things like knowing where the best bank for small business in Florida is (or whichever location), is just one thing that businesses will need to sort out, as this will help them get started, particularly when they need a loan or something. But it doesn’t just stop there. Three of the most common challenges are workforce development, taxes, and uncertainty around government regulations. People are beginning to understand these issues and leaders are working diligently to address these and other concerns. We looked at workforce development in the last newsletter and will look at regulation next time.
Generally speaking, the two most onerous taxes that businesses pay are the business personal property tax and the sales and use tax.
Business Personal Property Tax is an annual tax on the depreciated value of the capital used to operate a business. This tax covers everything from desks and chairs to heavy machinery. The burden of this tax is double. Not only are you paying for equipment on which you already paid sales tax; there is also the administrative burden of valuing all of your property, maintaining a depreciation schedule, and filing the proper forms with the proper agencies. Currently, businesses with less than $7,000 in business personal property are exempt from filing this tax. Thanks toH.B. 14-1279 which was supported by The Colorado Chamber and signed into law by Governor Hickenlooper earlier this summer, businesses with between $7,000 and $15,000 in personal property are refunded the full amount of the tax. While imperfect (businesses must still file the tax and wait to be reimbursed), this bill represents a step in the right direction.
Sales and Use Taxes are collected on goods and some services that are “sold, leased, or delivered in Colorado for use, storage, distribution, or consumption in the state.” Generally speaking, sales and use taxes apply to the same goods and services but differ in that sales tax is collected by retailers in Colorado while use taxes are paid by consumers when purchasing from an out-of-state vendor not collecting Colorado sales tax. Much of the complexity of this tax comes from Colorado’s patchwork of taxing districts. There are more than 70 home-rule municipalities in the state that self-collect sales and use taxes. The Colorado Department of Revenue collects sales and use taxes for statutory cities and various special districts. Multiple jurisdictions collecting sales and use tax opens the door to multiple audits. Many businesses are audited by more than one jurisdiction in a given year and many business owners agree that enforcement seems to be on the rise. Colorado has several resources designed to help navigate the sales and use taxes. Click here for information on the sales taxand click here for information on the use tax.
It is worth noting that Colorado has the lowest statewide sales tax in the nation at 2.9%. However, Colorado has the second highest average local sales tax in the nation (4.52%) raising the average combined sales tax in Colorado to 7.42%.
How does Colorado compare? Despite the complexity and associated burden of business taxes in the state, Colorado is relatively competitive compared to other states. The Tax Foundation, a non-partisan tax policy research organization ranks Colorado 19th best in the nation for overall tax environment. Our neighboring states rank anywhere between 1st best (Wyoming) and 38th best (New Mexico). When you look at the individual categories of the report, you see that Colorado ranks 44th worst in the nation for sales tax, largely due to the complexity of our sales and use tax system. You can view the entire report here.
The Colorado Manufacturing Initiative and The Colorado Chamber are hard at work to ensure a healthy tax climate in Colorado. You can read about The Colorado Chamber’s position on state and local taxes including the eventualelimination of the business personal property tax here. You can also learn how to get involved in The Colorado Chamber’s Tax Council here.
How is your business impacted by Colorado’s complex tax system? Please share your story with Patrick Pratt at the Colorado Manufacturing Initiative via email at [email protected] or by phone at 303-866-9657.
For help navigating Colorado taxes, contact Jerry Laflen at BKD via email or by phone at 303-837-3588.
In an effort to help spur private sector investment in Colorado’s advanced industries, the Colorado Office of Economic Development and International Trade (OEDIT) recently announced the creation of the Advanced Industry Investment Income Tax Credit program, which is expected to be available in early September 2014. This program is designed to incentivize private investors who take an equity stake in start-up companies with high growth potential in one of seven advanced industries: advanced manufacturing, aerospace, bioscience, electronics, energy/natural resources and clean tech, infrastructure engineering and technology and information.
For qualified investors, the tax credit is equal to 25 percent of their qualified investment in a qualified small business operating in an advanced industry. If the qualified small business is in a rural or economically distressed area, the tax credit increases to 30 percent of qualified investments.
There are several criteria that must be met to qualify for this credit; here is a brief synopsis of the qualifications.
To qualify for this tax credit, an investment must meet these criteria:
The investment must be made on or after July 1, 2014, and before January 1, 2018.
The investment must be in an equity instrument, e.g., common stock, preferred stock, partnership/LLC interest or a security or debt instrument that is convertible into an equity security.
The investment must be at least $10,000.
Investors must meet the following criteria to qualify:
An individual, LLC, partnership, S corporation or other business entity other than a C corporation
A 30 percent or smaller voting interest in the qualified small business immediately prior to the investment
Not more than a 50 percent voting interest immediately after the investment
Qualified Small Business
Small businesses wanting to qualify for this tax credit must meet the following criteria:
A corporation, limited liability company, partnership or other business entity
In an advanced industry
Headquarters in Colorado or at least 50 percent of its employees based in Colorado
Receive less than $10 million from third-party investors, not including grants, since formation
Annual revenues of less than $5 million
Actively operating and generating revenue for less than five years
Online applications are expected to be available in early September 2014. Qualified investors will have up to 90 days from the date an investment is made to apply to OEDIT for a tax credit. Credits will be granted on a first-come, first-served basis to qualified applicants based on the date and time applications are received.
Up to $375,000 of tax credits will be available in calendar year 2014, and no more than $50,000 can be claimed for each qualified investment. The total available tax credit is set to increase in to $750,000 for calendar years 2015 – 2017. The tax credit is nonrefundable, but any unused credits can be carried forward for five years.
For further information on this program, contact your tax advisor.
This information was written by qualified, experienced BKD professionals, but applying specific information to your situation requires careful consideration of facts and circumstances. Consult your BKD advisor before acting on any matter covered here.
Article reprinted with permission from BKD, LLP,bkd.com. All rights reserved.
Walmart Convenes National Manufacturing Summit in Denver
Published August 15, 2014 in The Colorado Chamber’s Colorado Capitol Report The National Manufacturing Summit sponsored by Walmart convened in Denver on August 14. On Thursday, Denver Mayor Michael Hancock and various Walmart executives including CEO Doug Mcmillon opened the summit at the Bellco Theatre.
The opening plenary session included manufacturers, Walmart executives, mayors and governors from across the United States, and Administrator of the Small Business Administration (SBA), Maria Contreras-Sweet.
Administrator Contreras-Sweet announced the SBA’s new focus to make the department “Smarter, Bolder, and more Accessible” to small businesses. This effort includes streamlining administrative processes, expanding international exports, and increasing access to capital.
New Mexico Governor Susana Martinez highlighted the reforms that her state took to go from the “worst state in the west for manufacturing to the best.” Her comments were based on an Ernst & Young study published this year that cited the state’s efforts to reduce tax burdens and administrative complexity on New Mexico’s manufacturers as some of the main reasons for the state’s increased competitiveness.
The same study showed Colorado as the third most competitive state in the West for tax rates for manufacturers, although the cost of doing business in Colorado was shown to have increased over the last several years.
The summit featured educational programs covering topics such as site selection, robotics and automation, contract manufacturing, and product safety and compliance. These programs are combined with a trade show featuring exhibitors from across the U.S. The trade show has been a huge success in the past and has featured trade show displays highlighting revolutionary products and services from the world of U.S. manufacturing.
Moreover, the trade show has always been well documented on social media. For example, last year, Instagram users were able to live stream presentations from exhibitors and there were also several Instagram Q and A sessions that were hugely successful. Photo opportunities and Instagram-friendly photo booths where attendees could take photos with company mascots and pick up fun freebies also proved to be popular. Above all, by incorporating a social media element into the trade show, all exhibitors were able to benefit from a boost in instagram followers. This just goes to show how social media is changing the world of business as we know it. Additionally, demand for another event in the future is already high.
As part of the plenary, session Walmart awarded $4 million in grants to manufacturing innovators. Attendees also have the opportunity to meet with Walmart staff to navigate the process of becoming a supplier.
Colorado was represented at the summit by The Colorado Chamber, nine governmental representatives and several manufacturers.
Some have questioned Walmart’s motives for supporting such an event, including the AFL-CIO who expressed concern about the “Walmart-ification of the manufacturing sector.” Others have doubted the sincerity of Walmart’s commitment to American manufacturers.
The program has tried to address some of these concerns by featuring manufacturers who have brought or are in the process of bringing their processes back to the United States because of Walmart’s commitment. Thursday’s plenary included mention of a Colorado manufacturer that has supplied Walmart for more than 45 years.
Finally, Duncan Mac Naughton, Walmart’s chief merchandising and marketing officer, Walmart U.S., said that when manufacturers see the world’s largest retailer investing $250 billion over 10 years in American manufacturing, it makes them realize that there may be benefit to doing business in the United States and analyze their own processes.
You can learn more by searching social media for #MadeInUSA.
EVRAZ Pueblo, a 140 year old company located in Pueblo, CO, is the state’s only steel mill. The plant employs roughly 1,250 people. They recycle steel to make rebar, oil and gas pipes, and 48% of the railroad tracks in North America. EVRAZ has a strong culture of giving back to the community including partnering with the local workforce center and a $60,000 investment in early childhood literacy programs in Pueblo.
NAM News: EPA Ozone Rules Would Cost $270 Billion Per Year
In an op-ed for the Wall Street Journal (8/14), Jay Timmons, president and CEO of the National Association of Manufacturers, notes that the EPA has proposed lowering the permissible level of ozone in the air from 75 parts per billion, a standard set in 2008, to 60 parts per billion. According to Timmons, the EPA has previously estimated that it will cost $90 billion per year to reach 60 ppb. However, Timmons points to a new study prepared for NAM by NERA Economic Consulting, which concluded that the annual compliance cost would actually be $270 billion. Timmons emphasizes that now is not the time to impose self-inflicted harm on the economy through regulations that will cost millions of jobs and trillions of dollars for dubious benefits.
Members of the Colorado Manufacturing Initiative receive a 20% discount on manufacturing databases from MNI when they order online.Click here to find out more!
Colorado Manufacturing Initiative
Colorado Association of Commerce & Industry 1600 Broadway, Suite 1000 Denver, Colorado 80202 [email protected]