Manufacturing companies can benefit from the continuous stream of legislation over recent months. COVID-19 has caused much change and uncertainty over the past five months.

With all of the economic struggles we have seen, many programs have been developed to help keep companies in business such as various SBA loans, employee retention credits, deferral of employer FICA payroll tax deposits, and even the deferral and payment options of sales tax for many states.

Oh, and let’s not forget the CARES Act which finally updated our last tax code revamp which restored the 15 year life and bonus depreciation eligibility to qualified improvement property. 

There are several benefits that have emerged from the recent legislation that you may have not yet considered: 

  • 5 year Net Operating Loss Carrybacks on losses incurred in 2018 to 2020.
  • 50% Adjusted Taxable Income limit on interest deductions.
  • Definition change of a ‘small business’ to $25M average gross receipts in last 3 years (previously was $10M).
  • The addition of the ‘Modified Simplified Production Method’ which could potentially lower the amount of GNA cost that must be capitalized into ending inventory, thereby providing more deductions. 

These considerations could drastically impact your tax burden and potentially improve cash flow. 

With COVID-19, not only are business revenues down but so is the amount of sales tax collected.  Thus, state revenue is down as well. 

We believe this will cause the states to be less flexible and increase the number of sales tax audits. 

To protect your business you need to continue operating, collecting and remitting taxes as you would under normal circumstances. 

If you did take advantage of deferred filing and payment of sales taxes, that time period has now lapsed and you should be on your regular time frame for remitting sales tax. 

We at Briggs & Veselka have been working with our clients to keep them up to date on the ever changing landscape around taxes and SBA loans. 

We too have been going through a lot of change.  Turning to Zoom for Webinars to the public as well as internally; working entirely remotely. 

We understand what businesses are going through and are here to help. 

Author: Lynell Lilly, Tax Partner at Briggs & Veselka

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