For businesses within the technology, communications and media, and life sciences industries, growth is essential and can be incredibly fast-paced. While it might be easy to get distracted by that forward momentum, it’s important to take time to assess how you’d like to continue down that path.
Whether you’re in a start-up phase or further along, there are tax and cybersecurity opportunities that could help you save money and safeguard your business and valuable data.
From a tax perspective, consider planning early as you explore credits and incentives—R&D tax credits, specifically—as well as international and state and local tax options. State and local tax needs particular attention in light of the US Supreme Court’s South Dakota v. Wayfair, Inc. ruling, which could present significant tax and logistical challenges.
Below you’ll find a quick synopsis on each of these with additional articles that dive into more detail.
Assess Your Tax Liability
Companies in the technology, communications, and life sciences industries make huge investments in technology and innovation—and there are incentives to help encourage that investment. It’s all about keeping up to date and providing undiluted capital.
1. Credits & Incentives
Innovation in the software and technology industries are natural fits for R&D tax credits.
Generally, the more a company spends to innovate, the more they can potentially save. The range is typically between 10% and 15% of qualified expenses and can span anywhere from a few thousand dollars to millions of dollars in savings. However, there are several factors that can impact that figure, and improperly calculating and claiming these credits could result in IRS penalties and fines.
Learn more about R&D opportunities for technology and software as a service, also known as SaaS, companies.
2. International Tax Planning
Clients and business move across borders more quickly in technology, communications, and life sciences industries. Change is the common denominator and requires constant vigilance to navigate tax-related complexities. This is especially true if you’re sourcing or selling to customers in international jurisdictions or working with historical tax havens, areas that are becoming more regulated.
Building a global tax strategy can help you establish a more efficient and cost-effective expansion plan for your business—and every plan should be flexible rather than reactive. The key is finding the right balance between implementation costs and your tax exposure.
Some areas to consider when building your strategy:
- Intangible property migration. Impacts effective tax rate of a multinational business and its enterprise value.
- Cash repatriation. Potentially decreases the tax impact of bringing cash back to the United States with careful advance planning and documentation.
- Inversions. Could lower corporate income tax rate by changing your domicile to a foreign country.
Once you have an established plan, then you can focus on day-to-day tactical decisions. Those approaches include looking at transfer pricing, utilizing employees versus contractors, permanent establishments, and withholding taxes. Learn more about how to approach these decisions in our Global Tax Strategies Guide.
3. State & Local Tax
State rules are constantly changing.
Here’s an example: For more than 50 years, vendors have controlled their sales tax compliance burden by limiting their activities in market states. But following the US Supreme Court’s South Dakota v. Wayfair, Inc. ruling, which overturned the physical presence standard, interstate vendors are subject to tax laws in each state where they sell goods or services.
This means vendors need to consider sales tax compliance requirements as soon as they begin making significant sales in another state, which could present significant tax and logistical challenges.
In addition to states trying to capture increased nexus, they’re also establishing revenue-based taxes. This is an area that often gets noted in diligence, so spend some extra time with it to avoid unknown liabilities.
Learn more in this article, which looks at how technology sellers and service providers can navigate their approach in the wake of the Wayfair decision.
Safeguard your Business
Today, nearly all business and financial operations are technology-driven, making IT systems and applications central to your organization’s sustainability.
Data breaches not only put a company and its employees at risk, but also its customers. The aftereffects can be as costly as the loss of the information itself.
Depending on the scale of the breach, a company’s reputation could become significantly damaged, driving down profit and jeopardizing customer and client relationships, leading to future loss of business and preventing growth.
Complacency is perhaps the greatest risk of all: Often, cybersecurity is seen as a lower priority. It’s no longer a question of if a network will be compromised, but rather when a network will be compromised.
Learn more about how to safeguard your company:
With the proliferation of internet applications, they’re now the primary target for hackers. Application security spending is one of the largest portions of an organization’s security budget and is expected to increase in the next several years, according to Gartner's 2017 Information Security Spending study.
Application security needs particular attention if you’ve outsourced any processes to vendors. Your network and system might have safeguards, but theirs may not—and that leaves you open to vulnerabilities.
Learn more in this article: Application Security for Technology, Communications, and Life Sciences.
We’re Here to Help
For more insight on how these options can help support growth for you and your business, contact your Moss Adams professional.