Death and Taxes. Once upon a time they were the only things that never changed. This past year has provided significant changes in taxes, along with other governmental regulations that some are calling “the death of small business.”
This isn’t a political column. It’s a quick review to help you prepare to deal with what’s coming your way, regardless of your political persuasion.
Minimum Wage Changes
Your state/city may be taking actions that will reset your entire pay scale. The current federal wage/hourly pay guidelines likely won’t cover 10% of the population by 2025. It’s the state/city regulations you should pay attention to. Here are issues retailers must think about while dealing with wage changes.
1. Get ahead of the mandated pay rates. You’ll be seen as a better employer than one who gives “raises” only when government dictates it.
However, your business has to generate the cash to pay these increased wages. This means reducing expenses or increasing sales margins. Panera and McDonald’s aggressively replaced hourly people with automation. Some Wall Street analysts believe Amazon raised their minimum pay scale to put pressure on Walmart, which has many more employees. Walmart’s answer was to “hire” 4,000 robots, allegedly reducing the repetitive, boring tasks and allowing floor personnel to focus more on customer contact. Cynics see Walmart using the robots to cut overall human payroll.
Can automation help you be more efficient?
2. Are you getting your money’s worth? Do you continually look for better skilled people to replace those who aren’t producing? Could you have part-timers working flexible shifts, making your scheduling more efficient as well as reducing benefit costs?
3. Consider the impact of raising your lowest paid people to $15/hour. How does that impact someone who has worked for years to reach $15/hour? Will they expect a raise to compensate for added skills and experience over the new minimum?
4. Do your salespeople know their true hourly rate—including all the spiff and commissions? Your local jurisdiction may not allow spiffs to count toward minimum wage. It’s easy for employees to forget spiffs when computing their total pay.
California’s Proposition 65
Moreover, the latest regulations allow stay-at-home “bounty hunters” to sue retailers/manufacturers and reap personal cash rewards from the penalties assessed to you. If you sell or advertise/e-mail into California, check out Proposition 65. You’ve been warned.
Depending on your perspective, the South Dakota v. Wayfair case, decided by the U.S. Supreme Court, opened the door for states to require out-of-state sellers to collect sales taxes under criteria unique to each state.
What you may not have anticipated is that each state has different regulations regarding how and who must collect the taxes. These are usually based on the volume sold into the state. Be sure you know which transactions you have shipped into a state, as most states base it on total shipments. This can also include resale and governmental sales. Determine that state’s threshold for volume or number of transactions.
In addition, if you’ve lost sales to non-tax-collecting websites, consider boosting your inventory so you have what customers come into your store to find. With the manufacturers moving to Just in Time (JIF) inventory, necessitating retailers to order stock one to six months at a time (which is economically irrational/impractical), you may have avoided stocking higher dollar lenses or bodies.
Before you couldn’t match the “no sales tax” websites, but that disadvantage has been taken away. Consequently, if you don’t have what in-store customers need, they aren’t going to wait while you order it. By not having it in stock, you’ll likely lose the customer—and perhaps the sale for our industry.
The industry wants to believe customers will continue to search for the product. Nonsense! Customers who can’t consummate the transaction in your store can walk out without any commitment to allocate their budget to that photographic product.
This leaves them open to changing their minds, as well as spending those budgeted dollars elsewhere. As an industry, we must have the goods on the shelf where—and when—the customers want them.
Good News about Tax Savings
As a result of the recent change in federal income tax laws, most small businesses are paying less income tax. Are you taking that “found money” and investing it in the business? New carpet? New lighting? Broader inventory selection?
Do something to make you more successful; provide a better customer experience; establish your company as a place where customers want to spend their money. In short, make an investment that will pay dividends for you.