J A N U A R Y / F E B R U A R Y 2 0 2 2 16 nebraska cpas S TAT E TA X B R I E F I N G Business owners know that what worked five years ago will not necessarily work today. The challenge for any business is to adapt its business model and its products and services to current and expected realities to pivot, grow, and maintain a thriving business. If a business doesn’t do so, it will fail. Jeff Bezos, Amazon’s founder, confirmed this when he stated: “Amazon is not too big to fail. . . . In fact, I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years. If we start to focus on ourselves, instead of focusing on our customers, that will be the beginning of the end.” These changing business models and offerings have implications in many areas, including state and local taxes. For companies that provide a combination of services and tangible products (including the use of tangible products), a change in business model or product lines can have a significant difference in tax results. A key consideration for sales and income taxes is whether a company is selling a tangible product or a service. Often company products are a combination of the sale of services and tangible products. From a state tax perspective, a determination needs to be made as to what type of sale it is, because it normally won’t be considered as both. BY NICK NIEMANN AND MATT OTTEMANN, MCGRATH NORTH LAW FIRM CHANGING BUSINESS MODELS LEADS TO CHANGING TAX RESULTS: ARE YOUR CLIENTS PREPARED?
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