You can get a special license in Pennsylvania to deliver beer. It’s a fascinating cocktail blend of our favorite licensing topics — home deliveries and liquor.

The specific license required is called a “Transport for Hire Class B”. It costs $700 to apply and there’s an annual $160 licensing fee. Approval takes weeks and there’s a limit on the sale of how much beer can be sold: 192 oz or two six-packs of 16-oz bottles. The order must be paid for by credit card—the delivery person cannot accept cash at the door—and he or she must ask to see identification from the customer. Hard liquor and wine may not be delivered.

In recent news, Boston announced that they are moving the licensing and permitting process to manage the 86,000 permits they receive annually to an online cloud platform. Could this be the future? It should certainly make it easier for Boston to manage the many licenses and permits it issues annually, but will it be better for the people who need to apply? We debated this very point in a 2014 webinar on emerging trends in business license compliance. The answer is like it is in many situations — it depends.

There can be serious consequences if you don’t get properly licensed in the states in which you are operating. Just ask AIG. They just settled for $35 million with the state of NY. You can read more about AIG and their settlement with New York state here.

Audience Question: We recently registered and started filing sales taxes in 31 states because of our internet sales shipping to those states. Does this cause any other filing obligations?

Joe’s Response: We would need to give a closer look at each state. For example, in Delaware and The District of Columbia, nearly every business that registers for sales tax is also required to have a business license.

Amanda’s Response: Licensing is both business activity specific and location specific. For general retail businesses, filing for sales tax doesn’t necessarily make you subject to a local business license but you may have already been subject to a local business license (from the localities perspective) because of shipments of your product to customers within a locality. Now, because you are filing state sales tax returns, the local authority has an enforcement tool to know that you have a customer in their locality and you may be contacted because they want you to apply for a local business license.

(Author’s Note: Business Licenses, LLC was pleased to host a webinar on April 30th, 2014 to discuss emerging trends in business license compliance. During the Q&A, the audience submitted many thought-provoking questions that our panelists didn’t have time to answer. We are going to periodically post those questions to this blog along with answers from the two panelists, Amanda Mattaliano and Joe Vitulli.)

By Alan Ruttenberg

Smarter(er) Jurisdictions and Other Emerging Trends in Business License Compliance

On April 30th at 2pm EST, Business License Solutions will host a webinar to explore emerging trends in business license compliance and predict future trends. There are no shortage of interesting topics to discuss since 2014 was a busy year for compliance professionals. The registration page for the upcoming webinar can be found here: https://www3.gotomeeting.com/register/250037334

Here’s some exciting news for tax, legal, and compliance departments across North America. Business License Solutions has created a white paper that combines many elements of previous blog posts, webinars, and related documents and adds some brand new content as well. It covers the entire business license research process from defining business activities (step 1) through creating a license portfolio (step 5).

Download the paper here: https://www.businesslicensesolutions.com/resources/white-papers/the-business-license-research-framework/

And there’s more. Business License Solutions will also be hosting a live webinar on February 19th at 2:00pm EST to walk through the framework and offer additional insights about each component of the research process.

Register for the webinar here: https://info.businesslicensesolutions.com/introducing-the-advanced-business-license-research-framework 

When I think of home occupations or home offices, I normally think of day care businesses or maybe lawyers or therapists that have offices in their homes.  I usually assumed that telecommuters who are salaried employees of a company would not need a home occupation permit or home business license.  But recently, I’ve discovered that this assumption is erroneous.

For the uninitiated, a home occupation permit and a home business license are usually two separate things.  Home occupation permits are zoning related and usually involve some sort of zoning approval that the home office does not conflict with the uses permitted in a particular area.  These permits are usually a one-time deal and do not need to be renewed unless there is some major change in the use of the home.  A home business license is essentially a tax imposed upon conducting business in the particular municipality and usually must be renewed.  Some municipalities do combine the two in some fashion – i.e. as part of the home business license issuance procedure, the zoning department puts their stamp of approval on the use of the residence as a home office.

I recently worked with a company that had acquired the operations of another company and was absorbing some of their employees, including employees who would be working from home, either managing other employees or setting up sales calls to commercial customers.  These were salaried employees who did not store any inventory in the home and who basically just used their telephones and computers to conduct business.  A full third of the municipalities that we researched required some type of license for these “home offices”.  Now some of these municipalities required that the company obtain a business license because having an employee working from home was construed as the company “doing business” within the municipality – these requirements, although not the norm, were not surprising.  However, there were municipalities that required that the individual obtain a home occupation permit.  These municipalities were in five different states so I couldn’t chalk it up to some strange local pattern. I spoke with many of these authorities personally since I wanted to determine why a salaried employee would need to go through this process. For the most part, it appears that these municipalities were using this as a revenue raising measure or because they were concerned about maintaining their residential areas – or sometime both. In one county in Tennessee, the homeowner/employee had to actually file a request for a special variance that had to be approved by the Zoning Board at their monthly meeting. When questioned about this, the zoning official confided that in the recent past, there had been a dominatrix that had tried to operate her business out of home and as a result, everyone – even salaried telecommuters – now had to obtain zoning approval. Talk about one bad apple ruining it for everyone!

All of the officials that I spoke with were very pleasant and patient with my questions. So much so, that I felt comfortable enough to ask how they enforced these requirements as it would seem fairly easy for telecommuters to fly beneath the radar.  The answers I received were varied but one of the more interesting answers involved business cards.  Patrons of local delis or restaurants sometimes put their business cards in a jar by the register in order to win a free lunch or other prize and the code enforcement personnel check those cards which often have the employee’s personal information on them in order for the restaurant to contact them in the event that they won.  I guess one lesson there is that there really is no free lunch.

*The information contained herein is intended for informational purposes only and does not constitute legal advice and is not intended to constitute advertising or solicitation for legal services.

Nobody applies much scrutiny to their internal licensing processes until something goes wrong.  After all, who wants to elevate licensing to the top of the “Problem List” for a growing company?  Everyone just expects that it gets done…timely and accurately.  But those of you researching new licenses for new products/services or a new company acquisition know that it’s not as easy as everyone assumes.  And the time allowed is often compressed.  Those are conditions that work to engineer mistakes and oversights.

The reality is that EVERY company has gaps in their licensing portfolio.  It just happens over time due to company business shifts, rule changes, and initial licensing mistakes.  So, in light of these factors, wouldn’t it make sense to investigate your compliance every so often before the local authorities clamp down with threats, fines, or embarrassing closure notices?  Uhhh, I think so.  Those are costs and distractions that nobody needs.

Investigating your license compliance can be a slippery slope if done incorrectly.  So the first step is to have a plan on how to proceed.  Here’s an easy one – hire an expert to lead you through it cheaply, efficiently, and honestly.  The risk of mistakes can get transferred to them and they will be able to get it done more quickly than you most likely.  They’ll ask the right questions and won’t have the internal bias that got you in a pickle in the first place.

However, you may possess the internal prowess to handle this without expert help.  Still, it means you have to devote sufficient time to accurately determining your business activities and to investigate the current rules surrounding those activities.  That’s a lot of sideways energy, phone calls, reading, and confirmation.  So employ a database that can do the research for you.  Selfishly I’d love for you to use mine, but use something rather than Lucy Lately, the two-weeks-tenure Licensing Clerk at your local municipality.  I’m sure you want more practiced advice than that.

Once you’ve decided the outsource vs. in-house question, just get on it.  Start with the more tricky revenue-oriented municipalities and then expand to the lower risk licenses.  When you find the gaps, solve them according to your plan.  Ask the licensing authorities for any interpretations you need and make sure to let them know that you are simply trying to do the right thing.  Then you’re on the road to repair…so long as Lucy Lately didn’t answer the phone.

About The Author

Doug Starr has served as Business Licenses, LLC’s Vice President of Sales and Marketing since joining the firm in 2011. Doug has more than 18 years of senior management experience in start-ups, with the last 11 years focused on sales tax and business licensing solutions. He has specialized in general management, sales, marketing, & streamlining operations for service businesses. Prior to joining Business Licenses, LLC, Doug was the Managing Partner for TaxConnex, a sales and use tax compliance start up, helping to grow them into the premier provider of sales tax compliance services for the SMB market. Doug also served as Director of Sales and Marketing for the indirect tax arm of Thomson Reuters’ Corporate Software and Services Division.

Doug is a graduate of California State University at Fullerton, and is a graduate of numerous executive, sales and marketing advanced education programs from Darden School of Business, McCombs School of Business, and the Mihaylo College of Business. He is also involved in a variety of community service initiatives, including Big Brothers, Big Sisters of America, High Tech Ambassadors, Radical Mentoring, and The Best Imaginable College Experience.

It’s not a secret that “no news is good news” with your business licensing activity, right?  While the ultimate goal of your licensing team is to be compliant, the unspoken goal may simply be not to raise any attention within the company.  The unfortunate side to this unspoken goal is that it always creates more problems than it solves.  And it turns dormant business license compliance issues into expensive business license remediation projects later.

Think about it this way – if you never get a medical check-up, you don’t have to get nagged by your spouse about how you’re not keeping up with your health rigorously.  You don’t have knowledge of a problem, your spouse doesn’t have an issue to press you on, and life just keeps rolling along.  Ignorance is bliss.  Unless there is a problem.  Then it becomes a bigger problem which is much more difficult to treat.  Maybe you do avoid the nagging for a longer period of time, but the outcome is much more serious, and can even be fatal.

OK…maybe that’s a bit over the top as an analogy, but directionally it’s correct in your tax and licensing departments.  So often the people handling the tax returns and business licenses feel like they have too much risk associated with really digging into the company’s level of compliance, and are coached into waiting for the symptoms to show up.  The shame is that it’s a disservice to the company and ultimately a blemish for the employees.

Companies who hire an outside partner to ensure compliance relieve all of the issues much more gracefully.  If it’s your job to ensure compliance, why not be proactive about it?  Get the check-up every now and again, and start treating the issues before the symptoms get out of control.  Here’s a good example – let’s say you’re a progressive company with lots of locations and a wildly creative product development team.  You’re releasing a unique set of products and features every quarter.  And the public is crazy about them.  You’ve got market acceptance…and growth…and shareholder value.  But you also have risk if you haven’t kept up with the business licensing requirements.  Some new products/services may require a licensing change.  Any new location may have unique licensing requirements that you haven’t faced before.  Your new product or location may trigger a gross receipts tax that you’re not aware of.  The symptoms are lining up and you don’t even know it.

I have a vested interest, because Business Licenses, LLC helps diagnose and treat these issues for large companies.  The reason we have a business is because it’s so much easier to rely on a partner who has been there before.  It’s like going to a doctor who understands your family history.  Both of us know what to look for.  And you get the benefit of a partner who can quietly solve the problems before they become front page news.  So why not hire a partner who can check into your licensing “wellness” and then give you a prescription for a quick recovery?  You’ll know the issues sooner, and you’ll have them solved before they become toxic and expensive.  And you’ll avoid all the nagging associated with doing it yourself!

About The Author

Doug Starr has served as Business Licenses, LLC’s Vice President of Sales and Marketing since joining the firm in 2011. Doug has more than 18 years of senior management experience in start-ups, with the last 11 years focused on sales tax and business licensing solutions. He has specialized in general management, sales, marketing, & streamlining operations for service businesses. Prior to joining Business Licenses, LLC, Doug was the Managing Partner for TaxConnex, a sales and use tax compliance start up, helping to grow them into the premier provider of sales tax compliance services for the SMB market. Doug also served as Director of Sales and Marketing for the indirect tax arm of Thomson Reuters’ Corporate Software and Services Division.

Doug is a graduate of California State University at Fullerton, and is a graduate of numerous executive, sales and marketing advanced education programs from Darden School of Business, McCombs School of Business, and the Mihaylo College of Business. He is also involved in a variety of community service initiatives, including Big Brothers, Big Sisters of America, High Tech Ambassadors, Radical Mentoring, and The Best Imaginable College Experience.

The economy is on the move (hopefully upward) and many businesses are experiencing growth either by acquisitions or expansion into new areas.  In the excitement/confusion of such growth, licensing concerns can get pushed down to the bottom of list.  However, this may be more detrimental to your new business plan than you realize.  Recently, I had a company that was acquiring another company and wanted to know how to transfer the acquired company’s licenses.  In this example, the licenses at issue were contractor licenses in numerous different states. Luckily, the acquirer had started this research process early – before the acquisition had closed.

They were somewhat surprised to find that the acquired company’s contractor licenses were not actually “assets” they would purchase as part of the deal.  Each of those company contractor licenses were tied to an underlying Qualified Manger or Employee license.  Not only did the acquiring company need to obtain new licenses since the licenses could not be transferred, they had to find new Qualifiers or employ the existing Qualifiers in order to even apply for new licenses.

As part of the closing, they needed to determine when the acquired company’s employees should be switched to the acquiring company’s payroll.  Many of those employees were license Qualifiers.  In the end, the company ended up having to have the Qualifiers file notices of disassociation from the acquired company so that they could be listed as Qualifiers on the new contractor license application.

Meanwhile, since there is a grace period for the disassociated company to obtain a new Qualifier, the acquired company could continue to operate under its licenses until the acquiring company had obtained new licenses. One of the most important questions that need to be asked in any acquisition or sale is whether the licenses are part of the package.  It seems like common sense, but many business people do not realize that some licenses run to the individual and not to the company.  This situation applies to small businesses as well as large companies.

Even transferring unregulated licenses can be more complex than one would think.  For example, a corporation decides to change its business structure to a limited liability company but everything else regarding the business operations and assets are essentially remaining the same.  Seems simple right? This company was unhappy to discover that for the most part all their tax registrations and business licenses could not be simply transferred. They were required to file new applications and registrations and close out the old corporation’s licenses.  Even if you are not changing your business structure, changes in ownership or officers can trigger licensing issues and require significant license amendments or relicensing.

So while change is good and can lead to greater profits, it may not be easy and there are many pitfalls along the way.  Avoid licensing pitfalls by using licensing research as a planning tool and keep licensing tasks near the top portion of the to-do list.

*The information contained herein is intended for informational purposes only and does not constitute legal advice and is not intended to constitute advertising or solicitation for legal services.

About The Author

Lorraine Cody serves as Director of Research at Business Licenses LLC. She is an accomplished attorney with significant experience in commercial litigation, insurance defense, antitrust, real estate and broker malpractice. Her background includes large law firm experience, substantial political and legislative experience and extensive public speaking experience. Prior to her work with Business Licenses, LLC, Lorraine served as a councilperson for the Town of Southeast, New York. She was publicly elected to the Town Board and served a four year term, working closely with legal counsel and land use planners and consultants. She was responsible for creating and overseeing the town website and recodifying the Town’s municipal code. Lorraine also served as an associate for Chadbourne & Park LLC, where she performed a broad range of litigation duties in state, federal and appellate courts.

Lorraine was admitted to the New York State Bar and U.S. District Court for New York. She received her Bachelor of Arts in Political Science from Russell Sage College and graduated Magna Cum Laude from Brooklyn Law School.