Tax Compliance & Planning for the Apparel Industry

Challenge

Within the apparel industry, amongst many others, it is a common issue for companies to struggle with their tax planning. One of the core pieces to this is the question of where they should do business and in which states they need to collect sales tax. Since this is an e-commerce based company, they sell all over the country and need to account for each state's different percent of sales tax once they hit the minimum threshold. 

Prior to GrowthLab, this company was using a hybrid method for accounting which is not applicable or appropriate for the scale of business that they do. They needed to change the way they were displaying their numbers to be better suited for both bookkeeping and tax purposes, to allow for a more fluid connection between the two distinct areas of their finances. 

Solution

GrowthLab worked to change this company to be on a true accrual-method of accounting. This was a big challenge to make sure everything was converted over correctly and the systems were set up on a forward-looking basis. GrowthLab used research tools such as CCH, allowing for the correct tax selections for their situation. GrowthLab knew what had to be accomplished and they took their time to move everything over which benefited the compliance and planning of taxes for this company. 

Results

This company is now on a fully-accrual method of accounting, which came to heavily benefit their tax position. This has made their reporting much cleaner, and as they grow we now have a base for future planning. 

For any companies that are in the apparel industry, GrowthLab recommends that they focus on cash management and inventory management. It is important to focus on those things to help know where the business truly stands, as oftentimes entrepreneurs look at distorted financials when their inventory is not on an accrual method. In addition, evaluating the overseas component can help to improve margins if you are thinking about going international. In this industry, some companies have subsidiaries overseas which could help save if you wish to expand. This will have an effect on tax, but if set up properly, there could be some further savings (with other things considered).

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.

Check out how GrowthLab has helped another apparel company!

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.