United States

Recap: 2016 tax changes affecting consumer products companies

INSIGHT ARTICLE  | 

What are some of the key tax considerations affecting consumer products companies this year and next? Our presenters provided their thoughts on this topic in a recent webcast. The presentation is part of RSM’s Consumer products issues and insights 2016–2017 webcast series. Key takeaways from the webcast included the following.

  • Consumer products companies frequently address customer preferences and buying behaviors through discounting, gift cards and loyalty programs in the hopes of boosting further consumer spending. At the same time, it’s important for companies to optimally manage supply chains so the right products are available at the right time. In leveraging these strategies, however, companies must explore tax implications to ensure compliance and optimal tax savings. Companies should review inventory methods and sales incentive programs. There are a number of tax considerations related to coupons, gift cards and loyalty programs.
  • Omnichannel is a valuable strategy for many consumer products companies as it improves reach to customers and personalizes those relationships on multiple platforms. There are tax implications to explore, however, including sales tax considerations, website enhancements or business expansion cost incentives, Section 199 implications, and nexus compliance concerns.
  • As a consumer products business grows, enhancements in people and infrastructure are needed. With these capital and human resources investments, however, is the business leveraging the various tax credits and incentives to help with these growth efforts? Research and development (R&D) tax credits, Work Opportunity Tax Credits (WOTC), empowerment zone (EZ) tax incentives and more are key areas to explore.
  • While some consumer products companies are expanding internally, others are looking to expand externally via mergers and acquisitions to extend brands or expand locations. With this growth, however, comes areas of tax consideration including sales, payroll, property and overall tax structure.
  • Global expansion is also an area consumer products companies are pursuing in terms of their overall growth. This new international positioning increases customers and extends business lines; however, there are trade and legislative regulations to weigh and various tax implications to consider such as transfer pricing and base erosion and profit shifting.

Year-end preparation and 2017 outlook 

With the end of 2016, there are a number of areas companies should review in terms of tax compliance and planning before getting too far into 2017, including:

  • Accounting methods
  • Deferred taxes
  • Advance payments
  • Bad debts
  • Year-end transactions
  • Cash basis taxpayers
  • Inventory methods: LCM, subnormal goods, UNICAP
  • Section 199: Margin impacts tax deduction
  • Prepaid expenses
  • Cost segregation
  • Bonus depreciation
  • Self-insured (IBNR)
  • Credits: R&D, WOTC, TIPs, EZ

Consult your tax professional for additional guidance on how to best position your company prior to filing your 2016 income tax returns. Also, read more about the potential impact of 2017 tax changes, and check out these related resources:

Year-end planning and tax reform

Tax reform likely to occur early next year

Expect tax reform to be a central focus of the new Congress and new administration in early 2017. Here is a look at what could be coming.

2016 year-end tax considerations for businesses

Pay attention to the legislative changes and other tax concerns that affect 2016 tax compliance and 2017 tax planning. Download our guide.

Charitable donations of inventory

Know the rules for tax deductions on charitable donations of inventory

Farmers, retailers, restaurants and food manufacturers often donate excess inventory for charitable use. Tax deductions may be available.

Loyalty programs and discounting

Discounting: Consumer demand vs. accounting complexity

Retailers should understand the tax and accounting issues that arise when responding to consumer demands for discounted goods.

Clothing allowances provided to employees are not always in fashion

Retailers and fashion companies must follow IRS guidance on the proper treatment of clothing allowances and qualified employee discounts.

Sales tax

What’s the deal with sales and use tax on remote purchases?

Growth in remote purchasing has states seeking ways to collect the sales tax funds, holding retailers and consumers responsible.

Fixed assets

Confusion over qualified leasehold improvements may create opportunity

Many companies miscalculate the available accelerated depreciation on qualified leasehold improvements. Is your company one of them?

Retail and restaurant industry guidance for tangible property regulations

This guidance provides updates on the tax treatment of remodel or refresh expenditures and a safe harbor method of accounting for qualified taxpayers.

Credits and incentives

5 myths that keep companies from filing for WOTC

Mistaken ideas about the Work Opportunity Tax Credit keep many employers from realizing tax savings. Read about 5 myths here.

Final internal use software regulations are mostly favorable

The IRS released final regulations relating to the development of computer software and its eligibility for the research tax credit.

State tax credits bring opportunity to growing businesses

Businesses expanding or increasing activity in their current state or in new states should consider the benefits of state tax credits.

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Events/Webcasts

IN-PERSON EVENT

Critical business issues to consider for 2018

  • October 26, 2017

RECORDED WEBCAST

Consumer products issues and insights 2016–2017 webcast series

  • April 19, 2017