It didn’t take long for the COVID-19 pandemic to dramatically alter the way businesses of all sizes operate. Immediately in the spring of 2020, industries in all sectors of the economy began adapting to the variety of challenges posed by the pandemic—from downsizing staff to rolling out ad hoc remote working agreements to rapidly transfer key business operations online.
Some of these impacts have reignited old debates around sales tax, employee status, and unfair marketing practices—and legislators have taken note. In recent months, several pieces of legislation were passed with the potential to impact integrators of all types across the United States.
Here’s a quick look at what you should be keeping an eye on if you’re an integration company.
Overcoming the Unfair Advantage Held by Big Tech Companies
Earlier this summer, President Joe Biden signed an executive order to promote competition in the American economy. It aims to do this in several ways, but the section surrounding competitive advantage should be of the most interest to the owners of integration businesses.
More specifically, the order recognizes the competitive advantage that large tech companies have regarding online marketing, especially those like Google. They own the marketing platforms that are so critical for small businesses to promote themselves on.
The order aims to curb an alarming trend in this area, in which tech companies like Google and Amazon are leveraging the mountains of data they possess. By analyzing the products, services, and marketing tactics of various small businesses, they then undercut those same small businesses by offering similar products and services more prominently.
Sales Tax on Remote Services
Back in 2018, the U.S. Supreme Court issued a landmark ruling (South Dakota v. Wayfair) that granted all states the ability to collect sales taxes from out-of-state sellers.
While this isn’t a new piece of legislation, it has taken on renewed importance since the beginning of the pandemic. As more businesses—including integration companies— have begun to provide remote services for their clients in the face of the pandemic, they may find themselves being classified as out-of-state sellers.
Not all states are leveraging this ruling yet to collect additional tax revenue, but the potential is there, and integrators need to be aware of their tax obligations, depending on where their remotely serviced clients are located.
Reclassifying Subcontractors as Employees
California’s gig worker bill (which consists of California Proposition 22 and California Assembly Bill 5) has re-opened a nationwide debate over the definition of an employee. This could have implications for integration businesses, which have long relied on subcontractors.
California Assembly Bill 5 states that most wage-earning workers should be classified as employees and entitled to labor protections like sick leave, unemployment benefits, and so forth.
Proposition 22 challenged this by attempting to get an exemption for certain workers. More specifically, it sought to exempt drivers for app-based transportation and delivery companies, such as Uber, Lyft, and DoorDash.
Prop 22 did pass but was ruled unconstitutional earlier this summer. Appeals and challenges will be made, but for the time being, California Assembly Bill 5 opens the door for subcontractors and temporary workers to be recognized as full employees, which may, in turn, impact the personnel decisions of many small integration companies.