Are you a contractor bidding on a job in a new state or city outside your home jurisdiction? Have you evaluated the state and local tax (SALT) obligations—and opportunities—based on the project location? If the answer is no, your company’s chance to win the bid and stretch your profit margins could be negatively impacted. HBK can help ensure you maximize cost savings and properly plan to avoid local tax pitfalls.

Opportunities for Planning

Every state has its own sales tax rules for contractors, and it is imperative your business is familiar with the rules and regulations prior to preparing a bid. For example, Ohio has a unique “business fixture” law that treats tangible personal property affixed to realty as a taxable sale as opposed to a construction contract.

Most states have limited exemptions available to contractors when they conduct work for government entities, exempt entities, or certain industries. Examples include Pennsylvania’s “building machinery and equipment” exemption on projects with qualifying entities and West Virginia’s broad industry-based exemption that applies to manufacturers, natural resource producers, and other specified industries. If a contractor fails to factor in the exemption, typically on specified materials, it could overbid the job and lose the project to a contractor with a better understanding of the tax implications.

For states that impose a personal property tax, West Virginia for example, it is important to not only comply with the tax but plan accordingly. Most states tax personal property in their state on a specified date, often January 1 or July 1, which can serve as a notice to allow time for tax planning.

Profit Margin Risks

Local taxes to consider include business income, gross receipts, and payroll. Planning for all your tax obligations and fees is vital to maximizing profits and ensuring bids are competitive. For example, many municipalities in West Virginia impose a business and occupation (B&O) tax on projects within their municipal limits. The B&O tax on contracting is often 2 percent of the gross receipts from the contract. Similarly, some localities in Pennsylvania impose a business privilege tax on contractors. If you do not account for local taxes in your bids, your bottom line will take the hit.

Contractors can have employees working in many states or jurisdictions; it is vital to understand the payroll tax implications from a compliance perspective. If state and local payroll tax rules and requirements are not addressed prior to breaking ground, you could find yourself on the hook for unexpected costs. You could end up reimbursing employees for state and local income taxes that should have been withheld. In a worst-case scenario, a jurisdiction audits the contractor who is found liable for tax, penalty, and interest with no opportunity to recover costs. In some jurisdictions, the state and local payroll withholding taxes exceed ten percent (10%) of wages paid. In today’s competitive market, businesses simply cannot afford unplanned expenses resulting from misunderstood or incomplete information.

Contractors need to evaluate each jurisdiction’s requirements for business licensing. Cities and/or counties may require a business license before operating in their jurisdictions. While the fee for a business license is typically nominal, fees can increase when receipts derived from the jurisdiction are a component of the fee calculation. Those fees eat into project margins and profits.

Given the complexity of state and local tax with its variety of rules that differ from jurisdiction to jurisdiction and the competitive nature of contracting, having accurate information on those taxes is critical to preparing a contract bid. HBK can help with our SALT project location review. Our review details the state and local tax obligations in a specific jurisdiction allowing you to create a bid that maximizes profits and minimizes risks related to compliance. Call or text us at 724-934-5300, or email me at mdodge@hbkcpa.com to learn more about our review services.

The pandemic has dealt a blow to many industries and businesses, but few could say they have been as negatively impacted as long-term care. Occupancy rates are at all-time lows and operating costs at all-time highs, and everyone is relying on stimulus money to survive. What are you doing to ensure your facilities survive this “great recession”?

It is time to take a deep dive into your operations and relationships to ensure your facilities remain open in 2022 and beyond. Some basic data analytics—for example, a simple analysis comparing your per diem rate to your competitors, state or county—can be used to identify areas you need to address, not only to stay in business, but to make a profit.

Grow your bottom line

Following are five ideas for increasing your revenues:

1. How is your relationship with your pharmacy and therapy providers? Do you own these services, or partner in one of them? Small to medium-size institutional pharmacies are willing to give price breaks or minority ownership for long-term contracts with facilities. Therapy companies are willing to do joint ventures or enter into management agreements to provide their services to a facility. Managing PDPM and pharmacy is vital to operating an efficient and profitable facility. Getting in bed with your providers is a sure way to increase your bottom line.

2. Labor shortages are common, and the cost of agency is through the roof. Consider buying or starting your own hiring agency or setting up a training center to feed labor to your facilities. Maintaining your current workforce is just as important as recruiting new talent. Use analytics to identify your best and worst employees. For example, analytics allow you to identify the employees who are documenting encounters properly and those who are not. You can identify which employees create risk. Develop programs to keep the best and let the worst go.

3. Have you identified the highest paying residents in your state? Setting up specialty wings to take care of vent and dialysis patients can multiply revenues. A typical Medicare patient might pay $350 a day; a vent patient could generate $1,000. Dialysis can be done via mobile units and set up in virtually any available space in the facility, saving on transportation costs and allowing you to keep vent patients that need dialysis in your facility.

4. Keep your residents out of the hospital and in their rooms. Offer wound care services and other care options to identify and address problems before they lead to hospital visits. Offering alternative care in the facility can generate ancillary revenue and maintain your occupancy levels. Consider setting up your own ambulate service to transport disabled individuals.

5. Take advantage of the Employee Retention Credit (ERC). It is not too late, and you probably qualify. The requirements of the 2021 version of the ERC have opened the door for almost any group of facilities. Don’t fall victim to the 20 percent fee that so-called ERC specialty companies are charging. The credit can be calculated and documented for a reasonable fee.

Get the right kind of financial support

Does you accountant know your industry? Working with an industry-savvy accountant is important to any business, but it is vital to healthcare organizations. We can, for example, help you set up more complex, more productive facility-specific analytics than most LTC facility providers can do on their own.

HBK Healthcare Solutions is a dedicated team of physician practice and living assistance facility subject matter experts within HBK CPAs & Consultants, an Accounting Today Top 100 CPA firm. We have worked with healthcare providers since our founding in 1949, and our current clients include assisted living, long-term care, skilled nursing and rehabilitation single-facility and multi-facility, multi-jurisdictional enterprises. For more information or to schedule a free consultation, call me at 330-758-8613 or email me at jzarlenga@hbkcpa.com.