It may seem odd to write about how Wayfair, Amazon, Google, and Uber are influencing integration businesses, but major legislative changes are happening because of their impact on the current business climate.
Heading into the post-COVID-19 recovery phase, here are four factors to watch and consider:
Physical presence and proper collection and remittance of sales/usage tax
The 2018 South Dakota vs. Wayfair U.S. Supreme Court ruling didn’t seem like it would have anything to do with integrators … but it might. There’s always been confusion about how an out-of-state company providing equipment and materials should handle sales tax … and now we add remote manage services to the mix.
Many states picked up on this ruling and began “revenue enhancement” measures to collect tax dollars. Clarity is the important thing here: No one wants to go through a sales tax audit. Worse yet is losing a tax audit and being fined. Will sales tax become an even bigger challenge for NSCA members with more regulation and government intervention?
See: 2021 NSCA Excellence in Product Innovation Awards Winners
Exempt vs. non-exempt status and the correct determination of employees vs. contractors
This has always been a little confusing. The NSCA community uses subcontractors, temporary workers, and labor providers as a normal course of business. Now, layer on the ruling in California about Uber drivers being considered employees.
California Proposition 22 and California Assembly Bill 5 (known as the “gig worker bill”) have reopened the debate about who is—and isn’t—an employee. Relief is temporary, as US HR 6988 momentarily permits digital marketplace companies (Uber, Lyft, DoorDash, Airbnb, etc.) to provide benefits to workers during COVID-19 without actions establishing them as employees or independent contractors or establishing the company as a joint employer under federal, state, or local laws.
This bill applies to digital marketplace companies that provide financial assistance, health benefits, training, health checks, and personal protective equipment to individuals working in such marketplaces from March 15, 2020, through June 30, 2021—or through expiration of the COVID-19 public health emergency. Will the gig economy grow or shrink due to government intervention?
Is Amazon a friend or foe to small integration businesses?
This global debate started in Europe and made its way into U.S. political and legislative agendas. Amazon captures and monetizes user data to drive future sales; arguably, small businesses can’t compete with that.
Amazon has been challenged with fair taxation payments; it has leveraged the digital marketplace to have many advantages over traditional brick-and-mortar retail businesses. The FTC is launching several investigations on the M&A activity of Amazon and companies like Facebook and others for using their perceived monopoly to essentially acquire competitors.
Will the government’s intervention place additional scrutiny on smaller businesses acquiring competitors? Could this impact our industry?
How do integration businesses compete with Google?
Is this something legislators should be concerned about? And why does nearly every state have a lawsuit against Google? The app store, the ads, the analytics, the monetized accounts: The Sherman Antitrust Act has been on the books for over a century, preventing unfair business practices.
Until this past year, people seemingly forgot it existed. Now, several states say that Google is using unfair leverage to convince other online companies to stop selling ad placements or be downgraded in search results.
Is that a punishment for being too big … or is that an antitrust violation? Lawmakers have jumped all over this, causing some manufacturers in the channel to re-evaluate how pricing models are structured and how one-off discounts could be scrutinized with heightened awareness of longstanding regulations.
Watch for our regulation and legislative updates—and don’t hesitate to reach out if you’re unclear about how they might impact your business.