Taxes & Government Regulations 17 Taxes & Government Regulations Section 17.1Taxes & Your Business Section 17.2 Government Regulations

Section 17.1: Taxes & Your Business Explain how the government uses tax money Describe the purposes of business taxes Suggest ways that businesses can reduce their taxes Section 17.1: Taxes & Your Business

Why Do Businesses Pay Taxes? Taxes are the money required by the government to support its various functions. Taxes paid by businesses and individuals by the following government services: Public Services Infrastructure Education Social Programs Social Security Health programs Defense Department of Defense (DOD) Business Small business Enterprise Zones Tax-increment financing Section 17.1: Taxes & Your Business

What Taxes Do Businesses Pay? For entrepreneurs, taxes must be included in every sale that is made and paycheck signed. Payroll Taxes. The government pays for retirement and disability insurance programs by using FICA taxes. Federal Unemployment Tax. payments to fund unemployment insurance are called FUTA. Consumption Taxes. The most common consumption taxes are local and state government sales taxes. Business Income Tax. Business income is taxed in the same way as income earned as an employee. The main difference is that the business owner is responsible for calculating and sending in these payments throughout the year. Property Tax. Entrepreneurs who own the land or building where their business operates are also subject to an annual commercial property tax. Section 17.1: Taxes & Your Business

Tax-Saving Strategies Tax avoidance is the use of legal strategies to reduce one’s tax liability. A deduction is an item or expense subtracted from your gross income in a tax return to reduce your tax burden. Employees’ Compensation Costs of Goods Sold Travel Vehicle Use Taxes Insurance Depreciation A tax credit is a dollar-for-dollar reduction in taxes owed. While a deduction lowers taxable income, a credit lowers the tax itself. Section 17.1: Taxes & Your Business

Government Regulations 17.2 Government Regulations Understand the role of government regulation Describe how laws require business owners to protect employees Recognize unfair business practices related to customers Describe requirements to protect the environment Describe government resources that help small business comply with regulations Section 17.2: Government Regulations

The Role of Regulation Early on in U.S. history, business was largely free from government oversight. In the 19th century, rapid growth through industrialization brought wealth. However, this growth brought with it some abuses. In the late 1800s, the U.S. government began to exert some control over industry to protect smaller businesses from larger ones, workers from unsafe work sites, the health of the public, and the environment. States often pass their own regulatory laws, some even stricter than federal laws. Regulation promotes the rights individuals, which makes the realization of entrepreneurial dreams possible. Section 17.2: Government Regulations

Employee Protection Government regulations ensure workers’ physical health and their career-advancement opportunities. The Occupational Safety and Health Administration (OSHA) is the federal agency responsible for setting and enforcing standards of safety in the workplace. The Equal Employment Opportunity Commission (EEOC) enforces laws that promote a level playing field in the workplace. The Fair Labor Standards Act, a federal law, guarantees most hourly workers a minimum hourly wage, a maximum number of hours worked, and extra pay for working overtime. Section 17.1: Government Regulations

Customer Issues Treating customers fairly is not only good business sense—it’s the law. Labeling The Fair Packaging and Labeling Act requires that all product packaging identify the item, its manufacturer, and the quantity, either in weight or number. The Food, Drug, and Cosmetic Act and its various amendments forbid any false or deceptive labeling. Product Safety The FDA and the USDA are also concerned with food and drug safety. They forbid the sale of adulterated products—those containing harmful substances, processed in ways that may be harmful to health, or modified to mask poor quality. Section 17.2: Government Regulations

Customer Issues Fair Competion The Federal Trade Commission (FTC) enforces detailed truth-in-advertising laws that cover promotion in all of its forms. Price fixing refers to competing companies agreeing to set the price of goods or services or the terms of business deals. Price discrimination is charging competing buyers different prices for the same product. A monopoly describes the situation where a single supplier becomes a market’s only provider of a certain product. Antitrust laws forbid anticompetitive mergers and business practices. A license is a legal document issued by a state or local government that allows a business to provide a regulated product or service. Zoning laws are designed to help ensure that businesses are good neighbors in the community. Section 17.2: Government Regulations

Environmental Protection Business owners must be aware of laws designed to reduce the harmful impact they may have on the environment. The Environmental Protection Agency (EPA) is the primary government agency in the US for enforcing environmental regulations. The Clean Air Act is legislation designed to reducesmog and air pollution. The Clean Water Act is the federal law that governs water pollution, including rivers, lakes, and oceans. Punishment for violating EPA laws can be costly. A business can be fined thousands of dollars each day until it meets standards. Section 17.2: Government Regulations

Help for Small Businesses Exceptions have been created to help small businesses deal with government regulations. Here are some examples: Employers with fewer than 10 employees are not required to document minor workplace accidents. Businesses with fewer than 15 workers are exempt from some provisions of the Americans with Disabilities Act. Tax credits are available for small businesses that follow sustainable practices, which help them meet EPA standards. Regulating agencies sometimes look to small businesses to assist them in developing rules and guidelines. Section 17.2: Government Regulations