Companies: Start Setting Aside Hidden Tax Money

When engaging in business planning for the next few years, privately held companies, particularly small to medium-sized ones, should consider allocating 2-3% of their revenue toward funding new and additional government mandates. This is not a criticism of government policies but an acknowledgment of the reality of running a business. Regardless of personal opinions on the matter, it is a practical suggestion for companies to begin setting aside funds from their revenue to cover expenses that will be required by the government. Three examples of such expenses include payment processing, employee retirement accounts, and addressing social issues in certain cities that may impact businesses.

One of the three examples we will be discussing is payment processing. Recently, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have been issuing directives and regulations for payment processors, specifically banks that handle credit card payments for merchants. This affects any business with a merchant account that accepts payments from customers. The regulations are ostensibly aimed at preventing fraud and protecting individuals from scams by requiring banks to monitor and detect what is known as “dark patterns.”

Dark Patterns

Dark pattern marketing is a technique companies use to manipulate people into making certain choices or taking certain actions, often without their full understanding or consent. This is usually done by using design and psychological tricks to create a false sense of urgency or to make a certain option seem more attractive than it really is.

For example, a company may use a “forced continuity” dark pattern by making it difficult to cancel a subscription or by making the cancellation button hard to find. This can cause people to continue paying for a service they no longer want. Another example is the “bait and switch” dark pattern, where a company may advertise a product at a low price, but when a customer tries to purchase it, they are redirected to a more expensive option.

Basically, if a customer purchases your product or service and did not fully understand the agreement based on their own naivety or manipulation, you are liable as a business for damages and refunding the customer(s) impacted. If you’re actually trying to scam your customers, you deserve all of the mandates and fines you can get. Be honest and transparent with your customers and avoid fines and fees.

Employee Retirement

Let’s look at another expense from Oregon. There’s a new retirement law that says you have to provide a retirement account for employees. You don’t have to fund it, but you must create a system where 5% of each employee’s paycheck goes into a retirement account. It may cost $50-$60 per employee to set this up, and it’ll also have to be monitored regularly. 

Additionally, if something does wrong with the account, the plan holder is charged 1%. This is legally mandated, and all businesses, regardless of their 5 or 500 employees, must comply or file an exemption.

Shopping Carts

This one is out of Washington state, where “shopping cart jails” take effect. In a dirt lot outside of Seattle, there are many shopping carts from all major retailers waiting to be bailed out of shopping cart jail. The city charges $25 each if the stores pick them up from jail or $62 for them to be delivered to the store. If stores don’t reclaim their carts within 14 days, the city will bill the store another $50 to destroy them. 

These are three examples of government mandates coming into effect. It’s not a matter of right or wrong; the point is it’s wise to start factoring in these expenses to your P&L statement. Your area may be different than others, but be prepared for these changes and let us know which ones are already impacting your regular business operations.