April 29/May 6, 2019: Volume 34, Issue 24
By Ken Ryan
The Tax Cuts and Jobs Act (TCJA) that became law in 2018 was intended to benefit corporations as well as small business, including many specialty floor covering dealers. However, year one produced a decidedly mixed bag for retailers. Some dealers who spoke to FCNews said they were unsure as to what extent the tax changes had on their businesses, citing mass confusion in the new law. A few said the tax cut they received was offset by external impacts such as supplier price increases or having to pay more in accounting fees because of the level of complexity created by the tax law.
The IRS estimated that nearly 8 million LLCs requested extensions this year along with a record 14.6 million individuals. According to dealers, the TCJA was anything but simplified even if some of them ultimately did benefit.
“I do know that businesses making less than $157,000 qualify for a 20% deduction if filing as single, but I don’t think it’s clear who qualifies for that break,” said Olga Robertson, president of FCA Network, which oversees dozens of independent retailers. “Accountants are still trying to figure that out, so everyone is in a wait-and-see mode. According to the IRS, they paid out 2% less in refunds ($5.3 billion) but most people forgot about the money they were able to keep throughout the year—so it’s pretty much a wash. Washington did a bad job selling this to the American people. The tax cut created a negative loop for this administration.”
Steve Weisberg, president of Crest Flooring in Allentown, Pa., thought the new tax law would free up money for business owners like him to invest in equipment and hire employees. “Almost immediately after that we had three or four price increases on soft surface, two on cushion and the tariff on hard surfaces,” Weisberg recalled. “So whatever savings the new tax law gave us was eaten up trying to keep up with all the price increases. Not to forget the nearly 35% increase in gasoline.”
How retailers fared had a lot to do with their location. In tax- friendly Florida, retailers found more favorable conditions even though it was difficult to measure in some instances. So said John Taylor, owner of Taylor Carpet One Floor & Home, Fort Myers, Fla. “I believe the tax cuts absolutely spurred people to spend, which in effect has helped business. The savings for many businesspeople I know on their personal taxes was significant and therefore more disposable income out there for all of us to go after. I have also heard numerous people say they were getting refunds, which also adds to the disposable income. Time will tell how it all plays out.”
Mike Foulk, owner of Foulk’s Flooring America, Meadville, Pa., has noticed a definite trend in consumers selecting better products producing higher tickets, but he stopped short of linking it directly to the tax incentive plan. “We have put money directly back into our building and equipment that, without the incentive, might not have been available.”
In Oklahoma, the tax break helped Flooring America OKC, according to Bobby Merideth, owner. “If nothing else, it motivated people to spend. That, in turn, starts the engine of our economy. We did see increases in transportation expenses, but that is a result of demand outpacing supply.”
If residing in a high-tax state like New York, however, dealers might be singing a different tune. “Honestly, I have noticed a large amount of people—not just customers—who have been surprised by their taxes and who owe this year due to changes in the amount the government was withholding,” said Ben Case, owner of The Carpet Collection, Lockport, N.Y. “I believe this has limited the return of pent-up demand.”
Adam Joss, co-owner of the Vertical Connection Carpet One in Columbia, Md., said his business has not benefited from the change in the tax code. “Living in a high-tax state, it seems to have done more harm than good,” he said. “We have heard prospects state that they’re putting their projects on hold as their refund wasn’t what they expected. Business taxes flow through to personal so [the tax law] is complicated.”
Carlton Billingsley, co-owner of Floors and More, Benton, Ark., called the corporate tax code “very complicated and cumbersome” for small businesses. However, he applauds the efforts of government leaders to continue to invest in small businesses. That being said, he feels the 2018 tax bill did not provide positive impact to its business. “We continue to see taxes, insurance and other overhead costs grow.”