We posted 3 new entries this week.  Sorry we didn't add each individually.  The posts are:

1. Rhode Island Probate Process: This post is a general overview of the probate process for deceased individuals in Rhode Island.

2. Detecting and Preventing Fraud: This post details the steps small businesses can and should take to avoid employee fraud. 

3. More Incentives for Energy Reduction: This post follows up on an earlier post about how you can save money by becoming more energy efficient in the workplace.

Happy reading!

One of the most important business obligations every January is the preparation of wage reports for filing with employees and the IRS.  In our most recent post, we review the applicable requirements. 

On January 1, 2010, Massachusetts will begin to enforce new regulations aimed at protecting the private information of Massachusetts residents.  The regulations will have a significant effect on anyone who does business with Massachusetts residents, including Rhode Island businesses.

For a full review of the regulations and how you can prepare, read the full post.

Will they or won't they?  With the estate tax set for total repeal in 2010, Congress is in last minute negotiations to figure out how to keep it alive.  It looks like a temporary deal is in the offing, with a one year extension of 2009's rates extended into 2010.  All the details are here.

Just because you filed the right paperwork to for a corporation or LLC doesn’t mean your personal assets are protected from corporate debts.  Business owners need to continue to observe all the required corporate formalities.  Read the full blog post here.

Today's Wall Street Journal contains a misguided review of online estate planning document preparation services.  But an estate plan is complicated – does it pass your property according to your wishes; does it minimize your and your loved one’s tax liability; is it easy for your heirs to administer?  Your computer doesn’t even know what the right answers to these questions are, let alone how best to get you to them.

My full post on the issue is located on Charting The Course.

Rhode Island seems locked in an intractable budget crisis with deficits looming as far as the eye can see.  So, government officials are looking for more - and potentially better - ways to raise revenue.  One such idea, the introduction of a tax on gross business receipts, recently was floated by Gary Sasse, Director of the R.I. Department of Administration.  The Providence Journal reported on Sasse's proposal last Friday.

The idea, and it's important to remember it's not really a fully formed proposal yet, would be to impose an across the board 2% tax on almost all business revenues, including service industries.  In exchange, the state could raise enough revenue to repeal the sales tax and, potentially, lower or eliminate the corporate income tax. 

Any gross receipts tax raises a number of concerns.  A primary concern is that it will disproportionately punish small businesses, who could see their tax bills explode.  The article notes that, to offset this issue, the state might insert an exemption that would excuse from the tax any business with less than $600,000 in gross receipts. 

The second major concern, only briefly referenced in the Projo article, is the so-called pyramid effect of a gross receipts tax.  Essentially, since the tax would apply to every transaction in the state, and some goods will pass through multiple hands prior to their final sale to a consumer, some goods may have much higher effective tax rates.  For example, if I grow an apple and then sell it to a customer for $1, the tax on that apple is $.02.  But, if I grow an apple, and then sell it to a wholesaler, who sells it to a distributor, who sells it to a shop owner, who sells it to a customer, then the tax on that apple will be $.08 (actually, it will be somewhat higher because the second tax charge will be 2% of 1.02, the third will be 2% of 1.0404, etc.). 

The cost of the tax almost certainly will be passed to the consumer, meaning the government, by imposing the gross receipts tax, is imposing different taxes on the same good sold at the same price (this is an especially acute problem for high-volume, low margin industries where a few pennies per sale can mean the difference between viability and bankruptcy).  That pyramid effect also may lead to inefficient vertical integration, whereby companies waste money producing parts for their own goods at a higher cost simply because it's cheaper than paying taxes on multiple downstream transactions.  In an attempt to counter this problem, Texas - which has a gross receipts tax - allows its businesses to deduct either the cost of the products they purchase or the cost of their employees (up to a certain amount per employee). 

If you're interested, the National Tax Journal published a study on gross receipts taxes on the state level in December, 2007.  Could the gross receipts tax work in Rhode Island?  How do you think such a tax would affect your business?