BELL-ISM - “Rulers do not reduce taxes to be kind. Expediency and greed create high taxation, and normally it takes an impending catastrophe to bring it down.”

Charles Adams

CAN YOU AFFORD TO PAY A GROSS-RECEIPTS BASED TAX WHEN YOUR BUSINESS IS IN THE RED?

IEC of TEXAS NEEDS YOUR HELP NOW! SEND US YOUR TAX STORIES!!!!!

The Revised Texas Franchise Tax also known as the Texas Margins Tax will take effect May 2008. This tax was implemented even though there are record surpluses in the state treasury. IEC of Texas is working for reforms to this new tax, BUT WE NEED YOUR HELP!

IEC of Texas needs your stories so we can work on reforms to this tax. We need to know how this tax will affect your business so we can work for YOU to get this fixed! Please complete the franchise tax calculator on the link below, we urge you to talk to your CPA, and send us an email at execdir@iecoftexas.org and let us know how this will negatively affect you.

TRUE IEC OF TEXAS TAX STORIES!!!!!!

HOUSTON, TEXAS:

I am a small electrical business. We make a living, but for instance, last year the bottom line for my business was approximately $11,000. We grossed approx 3.2 million, COGS sold ran 1.7 million, operating expenses ran 1.4 million. So, based on what I can get out of the comptrollers office is I will owe about $14,499 in taxes...This is about $3,500 more than what I made... Care to guess how long I can operate under that type of tax?

FT. WORTH, TEXAS:

We paid $980.00 in franchise tax last year. Using the calculator, my accountant said my new tax would be $7800.00 based on the same revenue. A 700% INCREASE!!!!!!

AUSTIN, TEXAS:

For last year, our franchise tax to the State of Texas was approximately $340. Doing the estimated calculation for the same period of time, our tax would be approximately $13,500. This is an increase of almost 3900%. As a service company, we also collected approximately $86,000 in state sales tax for that period of time. That is approximately $100K in one year, which the State of Texas would deposit in taxes because of the work of our company.

WHAT YOU CAN DO!

Make sure all your direct and indirect job costs are included in your "Costs of Goods Sold" on your Income Statements. Once you close your year end, you will not be able to make adjustments and the Margins Tax will be calculated on your gross margin (Revenues less COGS). Though the rules are not complete, we all need to err on the side of caution. Please complete the online tax calculator at the link below.

Note: We, the IEC of Texas are not offering accounting advice and you should seek counsel from your CPA's.

An online franchise tax calculator is available at www.window.state.tx.us/taxinfo/taxforms/HB3Calc.pdf to help taxpayers estimate their revised franchise tax liability.

WHAT IS THE TEXAS MARGINS TAX?

The Texas Margins Tax (TMT) is a newly-created tax based on gross receipts. Grossly misnamed, the Margins Tax is actually an income tax for many small business owners.
This tax is due in May 2008 on gross receipts for the 2007 calendar year.
Big business was the major backer of this new tax
The TMT does not take a business' profitability into account. All qualifying businesses MUST PAY, regardless of whether they are operating at a loss, breaking even or making money.
Virtually every type of business will be affected. Basically, if you're doing business in Texas with any type of state liability protection, you'll pay!
The new tax base, called your "taxable margin", is calculated on the lesser of three values:

Total revenue (gross receipts) minus cost of goods sold;
Total revenue minus employee compensation and benefits (contract labor cost not allowed); or
70% of total revenue.

Service companies will be hit the hardest, according to estimates.
You'll lose time and money paying attorneys or accountants to keep you in compliance with this complicated tax.
Most small business owners in Texas will likely see a tax increase in May, 2008 perhaps as high as 200, 400, or even 1,000 percent more.

Read the proposed rules for the revised franchise tax.