Rhode Island’s Commerce Corporation aims to help Rhode Island businesses flourish. They support local businesses in many ways by providing lucrative incentives such as tax credits and grant programs. One such initiative is the Innovations Voucher program which offers grants to companies performing research and development in partnership with local universities, research centers, or medical centers. New in 2018, this grant can also be given to Rhode Island manufacturers to fund internal R&D projects at their manufacturing facilities.
The grant is available to Rhode Island small businesses with 500 or fewer employees in the state. Awarded vouchers can range from $5,000 to $50,000 depending on the project. Similar to the federal research and development tax credit, the voucher must be used to fund new or more innovative products or processes. Businesses cannot use the grant money for ordinary and necessary business expenses such as marketing, website development, software purchases, etc.
Awarded vouchers can be used for the following activities:
- Technological development or exploration
- Product, service, or market development
- Services and activities including access to research or scientific expertise
- In-house research and development projects in a manufacturing facility
- Improved business practices that help grow the business and create operational efficiencies
Applications are accepted on a rolling basis, so it’s never too late to contact the Rhode Island Commerce Corporation.
On Thursday, June 21, 2018, the U.S. Supreme Court overturned its previous 1967 and 1992 rulings on two cases, National Bellas Hess vs. Illinois and Quill vs. North Dakota, that had upheld physical presence being required in a state before it could impose sales tax on purchases made by residents in their state. In a 5 – 4 decision in Wayfair vs. South Dakota, the Supreme Court ruled in favor of the state authority to require online retailers to collect sales taxes without regard to physical presence in the state.
With this decision, states stand to gain much-needed tax revenues for their budget deficits. In addition, there may be even more significant cost consequences for small online retailers that do business in multiple states.
As part of the ruling in the 1992 Quill vs. North Dakota case, Congress was given ultimate power to resolve sales tax issues pertaining to interstate commerce. Discussions surrounding the concept of an “internet sales tax” is not new. Each year, since 2010, legislation has been introduced that proposed a federal tax bill; however, to date, Congress has failed to pass any such legislation that would lend a sense of uniformity to sales tax regulations.
Now that states are being given the authority to pass their own legislation to impose sales tax on purchases from out-of-state retailers regardless of physical presence, and with the inevitable increased complexity that retailers will be forced to comply with, it is possible that Congress will be spurred to provide federal guidance surrounding applicability and compliance as a result of the ruling.
In our previous post, Authenticated Financial Information, we explored the need for a private company clearinghouse that can be used to protect and deliver trustworthy financial information. One of the ways firms and their business clients are utilizing a clearinghouse is for SOC report distribution – a process that is becoming more challenging to manage as an increased focus on third-party controls has led to a rise in requests for reports.
If you consider the way most service organizations distribute SOC reports today, you might think of basic methods like email and mail, often with no standardized process or central group managing it. Requests are often sent to various individuals at a service organization from different types of requestors. While convenient, these methods offer little in their ability to track where reports have been sent to and in verifying that the person requesting the report is qualified to receive it. What happens when there is a change or updated report available? How would the previous recipients be notified? What is the approval process? Are NDAs appropriately collected?
Aside from internal challenges, what about the customer experience? Providing customers with an easy, quick way to receive reports is important, but one should also consider if their distribution methods reflect a level of security and control that one would expect from an organization that has already undergone a SOC engagement.
RIVIO solves all these challenges and boasts a high level of user-friendliness for all parties. It puts a service organization in control over the distribution of their SOC reports while also keeping everything confidential and secure.
How does it work?
RIVIO Clearinghouse is a platform designed for three different users: CPA firms, businesses, and third-party users. It provides one location for each party to request, share, and verify information – all through a secure, accessible environment that has undergone all three SOC examinations, has received an ISO 27001 Certification for Service, TRUSTe Privacy Policy Certified, and EU-US Privacy Shield certified.
- Request: The platform offers a way for organizations to request SOC reports from their CPA firms and provides a way for customers to request reports from their service providers. When requests are issued, a notification is generated through the system and produces a link for the appropriate party to respond by uploading the SOC report.
- Share: SOC reports can be shared with individual customers or with groups through defined distribution lists. The platform tracks recipients of reports and also provides a way to recall information, should a report be updated.
- Verify: The platform has a validation process to confirm information came from an authentic source and has been unaltered.
Are you ready to take control of SOC report requests? Visit RIVIO.com to learn more.
There is a growing demand today for accurate, source-verified financial information. But, what is driving this demand? Users of audited financial statements, such as investors and lenders, have increased their focus on the authenticity of the information they receive. While technology has positively impacted the speed and accessibility of information, it has also had some negative impacts – creating new ways to alter and compromise information.
Unfortunately, there are plenty of instances of fraud occurring, either by altering information after it’s been reviewed by a CPA firm, completely falsifying an audited financial statement, or even creating a fictitious firm. Those committing these types of fraud have put the information that others provide under great scrutiny. How can those receiving the information be sure of its validity?
For public companies, this is avoided by use of EDGAR. However, for private companies, there hasn’t been a similar Clearinghouse until recently. CPA.com, an AICPA company, collaborated with Confirmation.com to develop RIVIO Clearinghouse to not only ensure that financial information provided by a CPA firm is protected, but also to provide a more efficient way for all parties to exchange information.
RIVIO provides an online platform that enables CPA firms to exchange information with their private business clients who can then share it out to any third parties that may need this information. It streamlines and controls the process while also ensuring that third parties receive authenticated financial information. For private businesses, it brings more trust to the information provided to third parties and facilitates a more efficient manner for exchanging information.
This cutting-edge solution is a gamechanger for CPA firms and their private business clients, and it is rapidly gaining market acceptance. In a time where it is becoming more challenging to control and protect information, RIVIO is positioned to meet the growing need for authenticated information.
Learn more at RIVIO.com
It’s a small world, after all.
Our partner Bill Pirolli just returned from a whirlwind tour of China as part of his service to the profession. Bill is a member of the US Board of Directors of the American Institute of Certified Public Accountants (AICPA) and the 38-member Board of Directors of the Association of International Certified Professional Accountants.
The Association Board is the combined efforts of AICPA and the Chartered Institute of Management Accountants (CIMA). Combined, these organizations represent the world’s largest and most influential collection of accounting professionals with over 650,000 CPA and CGMA members and students from 179 countries worldwide.
The trip’s purpose was to meet with the leaders of the Chinese and South Asian markets of CIMA and get a viewpoint of the economy, culture, and the profession from the other side of the world.
With a population of 1.3 billion people, China is the world’s second-largest economy; yet, in many ways, it is still a developing country outside of its major cities like Shanghai, Beijing, Guangzhou, and Shenzhen. These four cities alone are where over 100 million people live and work. Compare that to the largest four cities in the United States – New York, Los Angeles, Chicago, and Houston – where the total population is a mere 17 million.
In the past 20 years, the economy of China has boomed along with the need for trained accounting professionals and many other specialized workers. The market capital of Alibaba is almost that of Amazon, and Tencent is now larger than Facebook. Bill had the opportunity to meet with many Chinese CFOs (including Coke China) and hear about the regional differences that businesses like McDonald’s, Coca Cola, KFC, and Subway make in their products or delivery to suit the Chinese market.
The trip also included an event to honor recent graduates of the CGMA (Chartered Global Management Accountant) program and their induction into CIMA membership. The highlight of the Board’s activities was a visit to the residence of the US Ambassador to China, Terry Branstad, to hear about some of the top financial, cultural, and political issues of the day.
Yes, regardless of how big, it is a small world.
One of the most rapidly growing means that companies are using to increase their sales is by offering their products through Amazon. Many businesses are selling their products through the Amazon FBA program (Fulfillment by Amazon). When a seller uses the FBA program that Amazon offers, they are typically instructed to ship inventory to an Amazon warehouse with an agreement that, as the company sells their products through Amazon, Amazon will take ownership of product shipment and order fulfillment. The seller’s products are stored in Amazon fulfillment centers where Amazon picks, packs, ships, and in some cases, provides customer service for those products.
When using FBA, a company generally sends its inventory to one Amazon warehouse location; however, depending on how the product is listed for sale, Amazon may relocate the inventory across many states where they have fulfillment centers. Owning inventory in another state creates nexus in that state for sales and income tax. If Amazon is handling a company’s customer service and delivery for their products, there is also the potential for states to take the position that those services are creating an agent relationship, allowing the company to create or maintain a marketplace in those states.
The opportunities provided to businesses through FBA to expand their customer base without having to handle much of the back-end fulfillment responsibilities, especially for small and medium-sized businesses, has proven to be advantageous for many sellers. With the expansion of business through e-commerce also comes the potential for the expansion of a company’s nexus footprint for state and local taxes.
According to the Tax Foundation’s Fiscal Fact No. 572, forty-five states and the District of Columbia collect statewide sales tax in addition to having either income, gross receipts, franchise, or business privilege tax filing requirements once nexus is established in their respective states. For all states, owning inventory that is stored or warehoused in a particular state creates nexus for sales and income tax purposes and, in many states, third-party fulfillment arrangements will create nexus for sales tax purposes.
Whether you are using FBA or other avenues of e-commerce, the challenges of state and local tax compliance requirements can be extremely daunting and challenging. Contact us to see how we can help you determine where you have left or are looking to create a nexus footprint.
The American Institute of Certified Public Accountants (AICPA), and more specifically the AICPA Assurance Executive Committee (ASEC), recently issued TSP Section 100, a new set of Trust Services Criteria that apply to SOC 2, SOC 3, SOC for cybersecurity engagements, and supersedes the 2016 TSP Section 100A.
When is the change effective?
SOC 2 reports can be issued under the 2016 guidance through December 14, 2018. However, any report issued on or after December 15, 2018, will be required to use the new 2017 Trust Services Criteria. However, early adoption is permitted.
What changed and why?
Formerly referred to as Trust Services Principles and Criteria, the name of the new guidance has been changed to the Trust Services Criteria.
The principal reason for issuing the updated guidance was to more closely link the TSP with the Committee of Sponsoring Organizations (COSO) 2013 Integrated Framework. This is most commonly recognized by the business community as the framework of choice to assess the design and operating effectiveness of an entity’s internal control over financial reporting. The TSP, like COSO, is used to evaluate internal controls and, more specifically, controls over security, availability, processing integrity, confidentiality, and privacy. According to the AICPA, one of the key benefits of this update was to more closely link these two essential frameworks. Additionally, the AICPA noted that the updated TSP framework allows for cybersecurity risks to be better addressed and allows for a more flexible application.
COSO Internal Control – Integrated Framework
COSO is comprised of 17 principles which are organized into 5 categories:
- Control Environment
- Communication & Information
- Risk Assessment
- Monitoring Activities
- Control Activities
As noted more specifically in COSO Principle No. 12, “The organization deploys control activities through policies that establish what is expected and procedures that put policies into action.” By more closely linking the COSO Integrated Framework with the TSP as well as the addition of what is now referred to as the “supplemental criteria,” the new TSP augments the COSO principles in terms of evaluating internal controls over security, availability, processing integrity, confidentiality, and privacy. Particularly, TSP Section 100.5 defines the supplemental criteria as follows:
- Logical and physical access controls: The criteria relevant to how an entity restricts logical and physical access, provides and removes that access, and prevents unauthorized access
- System operations: The criteria relevant to how an entity manages the operation of system(s) and detects and mitigates processing deviations, including logical and physical security deviations
- Change management: The criteria relevant to how an entity identifies the need for changes, makes changes using a controlled change management process, and prevents unauthorized changes from being made
- Risk mitigation: The criteria relevant to how the entity identifies, selects, and develops risk mitigation activities arising from potential business disruptions and the use of vendors and business partners
Points of Focus
Part of the COSO and TSP integration included the adoption of points of focus into the new TSP. Points of focus provide guidance and examples of important characteristics that should be considered for each control criterion. While the points of focus are new to the TSP, they have always been a part of the COSO Integrated Framework.
The TSP does not require each point of focus to be addressed, however, management should customize particular points of focus, or identify and evaluate other characteristics, based on specific facts and circumstances applicable to their system of controls. As any SOC auditor will freely admit, the application of the TSP involves judgment, and that will be crucial when reviewing the points of focus as they will not all be applicable or suitable for each service organization.
The 2017 Trust Services Criteria can be purchased from the AICPA store (which can be accessed by following this link here). Additionally, click here to download a mapping of the 2017 Trust Services Criteria to the 2016 TSP from the AICPA’s website, including the updated points of focus for each criterion.
One of the fastest growing industries in the United States, and around the world, is the cannabis industry. It is estimated that by 2025, the worldwide market could reach over $50 billion dollars. The United States has long been a leader in the industry, but Canadian and European markets are gaining traction quickly.
Regardless of where you stand on the issue of medical or recreational marijuana, the industry is likely here to stay. Things are moving quickly as states posture themselves to reap tax revenue from both medical and recreational marijuana. It is not often that an entire industry is born.
Business challenges include raising capital, banking and insurance, strict state regulation and oversight, income taxation…oh, and the fact that the industry is in violation of federal law. Previous administrations had taken a soft approach to state legalized marijuana enforcement, but the current administration has reversed that stance, once again leaving the industry in turmoil.
For those looking to break into the industry, you will have to be well-funded, patient, ready to deal with incredible and constantly changing local and state bureaucracies, stiff competition, heavy risks, complex organizational structures, complicated recordkeeping, legal and social opposition, and, of course, taxation.
Our Experience
Not every tax professional is willing to represent clients in this industry or to learn the complex rules related to state and federal taxation. At DiSanto, Priest & Co., we understand the rules and work with other legal and business professionals to assist you in evaluating your options, consulting on organizational form, payroll and banking, and customizing recordkeeping to ensure maximum tax benefit while working through local and state regulations that are, in many cases, antiquated and unprepared to handle this new, dynamic industry. As with anything that is new and different, there are as many questions as answers.
At DiSanto, Priest & Co., we are currently working with multiple clients directly and indirectly in the industry from care-givers, growers, and cultivators to complementary industries like extraction and compounding. We understand the unique federal and state tax law related to the industry and can quickly get you started on the right foot. This is a tight-knit community that regularly shares knowledge on processes, vendors, regulations, and professional representation.
Our partner, Bill Pirolli, heads the division and has over 40 years of tax and business consulting experience. He was previously appointed to the prestigious National Conference of Lawyers and Accountants where marijuana issues were front and center on the agenda, including the study of nuanced federal and state law, providing both white papers and testimony before Federal officials. Contact us today for more information.
We receive regular checkups to monitor, maintain, and improve our health. But did you know that you should do the same for your company? Financial statements provide the vital statistics necessary to track a company’s health. Investors use financial statements to research potential investments, bankers base lending decisions on a company’s financial statements, and valuation experts utilize financial statements to determine a company’s worth. By routinely scrutinizing your financial statements, you can monitor and improve your company’s performance and, ultimately, its value.
A comprehensive financial analysis employs ratios to measure a company’s past and current operations, allowing you to compare its results to others in its industry. This type of review offers insight into the historical growth, profitability, debt capacity, and overall liquidity of the subject company in the context of its industry. All such factors can be important indicators of a company’s ultimate value and provide useful information to business owners and managers who want to more effectively and efficiently manage their operations.
You can perform your own financial checkup for your business. To begin, obtain a history of your company’s financial statements; five years’ worth is usually a good base. Next, convert the financial statements to common size. Common size financial statements are simply your company’s financials expressed in the form of percentages rather than dollars. A common size format readily identifies trends and growth patterns. Additionally, since industry benchmark data is often produced in this format, it makes it easier to compare your results with the competition. Industry benchmark information can be obtained from a commercial vendor, your accountant, or, depending upon the industry, from trade associations.
Next, financial ratios are calculated. There are a number of ratios to choose from – some of the more common ratios measure liquidity, debt coverage, leverage, and operating and profit performance. Their relevance is dependent upon your company, its operating characteristics, and the industry. Bankers and accountants can be especially useful in identifying the more pertinent ratios.
The information gathered thus far is analyzed and compiled on a trended, composite, and industry basis. The results of this analysis, when performed regularly, help you to monitor and recognize the vital statistics necessary to maintain the success and growth of your business. The benefits of this assessment include:
Competitive Advantages & Disadvantages
An industry assessment enables you to identify your company’s strengths and weaknesses and acquire valuable information on the competition.
Budgeting & Forecasting
Studying trends and growth patterns is a very effective preliminary step in preparing internal budgets and forecasts.
Strategic Planning
Recognizing specific performance measurements (company and industry) will help to set goals and objectives for the future (e.g. increasing sales, gross profit margins, and net income).
Acquisition Opportunities
Knowledge of key performance measurements assists in the evaluation of a proposed sale, merger, or acquisition.
Focus
Greater awareness of the interrelationship of the financial statements and a complete understanding of financial operations allows you to focus on the areas important to the growth and success of your business.
Regardless of whether you perform, or your accountant performs, a financial analysis is akin to your annual physical examination…it is crucial to understanding your company’s health – past, present, and future.
Our partner, Leah Szlatenyi, directs the Bentley Consulting Group, LLC and has over 25 years of tax, financial advisory, and business consulting experience. As a former member of the American Institute of Certified Public Accountants’ (AICPA) National Business Valuation Committee, Leah has extensive knowledge in the evaluation of an organization’s financial health, business planning and forecasting, and strategic implementation.
Is your company future ready? We are living in an incredible time of rapid change around the world. Technology, regulation, global economics, political uncertainty, business transformations, generational shifts; and there is no end in sight.
Planning for Market Shifts
We have always dealt with change but never has change come so rapidly. Your smartphone is only 10 years old. How has it changed your life and your business? Artificial intelligence, virtual reality, augmented reality, online commerce, blockchain, Bitcoin, driverless cars, and more. Are you ready for those changes to your business or organization? Will your organization be disrupted by the likes of Uber, Air B&B, Amazon, and others – or will you be a disruptor by creating the next big thing?
Like so many of us, we go through our business day focusing on the present and dealing with the past, but what about the future? Is your organization properly positioned to seize new opportunities and navigate upcoming threats? Have you addressed succession in ownership, management, and on the shop floor? What will your organization look like in three, five, and ten years? These are difficult questions that many simply put off.
Strategic Planning Engagements
Your financial advisor can certainly assist in projecting financials like revenue, profits, taxes, cash flow, and future capital needs, but, in some cases, they can also help you dream about the future of your organization through a formal Strategic Planning Engagement.
The process of developing a future strategy can be daunting, especially for smaller family-owned businesses or organizations with limited resources. The best way to accomplish this goal is to use an outside facilitator who understands the process of long-term planning and the business challenges that all U.S. companies face, serving as a neutral voice in building consensus.
Our partner, Bill Pirolli, has decades of just such experience. Not only has he been on the front lines with his clients for over 40 years as their trusted business advisor (as well as serving in management positions in DiSanto, Priest & Co.), he has also led dozens of strategic planning retreats for accounting and law firms, private businesses, and non-profit organizations.
About Bill Pirolli
Bill has been a volunteer to the accounting profession and business community for over 20 years. He has been the President and Chairman of the Rhode Island Society of CPAs (RISCPA), the Central Rhode Island Chamber of Commerce, and the American Institute of Certified Public Accountants’ (AICPA) Private Company Practice Section. He has held many other committee positions and is currently appointed to the United States and International Board of Directors of the AICPA, an organization with over 650,000 members in 189 countries. Through these experiences, Bill has participated in many strategic organizational visioning projects and learned the best practices for developing a future-proofed strategy.
Get in Touch
Contact us to see how strategic planning can propel your business into the future.