Big Companies Triumph over Small Businesses

| 28 Jan 2013 | 0 Comments

Corporate tax news this week comes from the USA where large companies are set to enjoy tax breaks in return for charitable donations, whilst small businesses get ready to endure the loss of their tax advantages.

USA – This week will see the finalization of agreements from Twitter and six other San Francisco technology companies to commit to certain promises and charitable contributions in exchange for the avoidance of local taxes.

According to reports, the agreements, known as the Community Benefits Agreements (CBA), could be finalized by Tuesday 29th January and will document certain non-binding promises regarding charitable contributions in exchange for sizable tax breaks.

The contributions to charity are thought to be in the tens of thousands and Twitter has also pledged promotional tweets for local groups to further support charity and nonprofit organizations.
According to an interim city administrator, the complying tech companies are to donate approximately 30% of the amount they would receive in tax breaks, however the actual number cannot be determined due to companies refusing to release their financial estimates.

As reported by buzzfeed.com, Twitter has committed to helping nonprofit businesses by making available $60,000 in grants and $50,000 in IT equipment for educational institutions.

Companies set to sign the CBA include:

Twitter
Yammer
Zoosk
One Kings Lane
ZenDesk
21Tech

Summary of CBA plans for signing parties:

Make charitable donations
Hire employees locally
Volunteer
Spend money to help local businesses

New York, USA – Small businesses are expected to lose their tax advantage of being exempt from collecting sales tax in states where they have no physical business presence.

The collection of the sales tax incentive has been in working order since the e-commerce boom and as such, businesses who have survived the recession through these tax benefits now face a new worry if the advantage is to be cut.

Current law for the collection of sales tax

Companies at present are not required to collect sales tax on any purchases unless the company has a physical presence in that state, be it an office or any other physical building linked to the company.

Due to a review of taxes by Washington lawmakers, new tax bills are being drafted in a bid to end the collection of tax advantage.

Small businesses have claimed the new bill could have the strength to put them out of business, as the new costs involved in collecting sales tax would be significantly higher than they can afford.

The upside of the proposed bill is that larger companies, who currently find it difficult to compete with competition from small businesses selling at lower costs due to non-collection of sales tax, can now sufficiently compete in a fairer marketplace.

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