A business license is the tool used by local governments to monitor all businesses in their community. It triggers at least two types of tax. At a minimum a revenue and personal property tax is charged through this registration process.

Typically, the revenue tax is based on the total sales for a calendar year. Some industries pay this tax monthly, still some pay it quarterly, but most pay this tax once a year. Each state mandates this process differently but the computation is relatively similar. A base rate or flat fee is charged up to a certain dollar level and then a percentage is charged for each dollar in excess of that level. Below are two separate examples:

Less than \$100,000/year in sales: The local Commissioner of the Revenue uses a flat rate fee program of somewhere between \$30 upwards to \$100 depending on the type of business operation. Usually, the professionally licensed operations such as hair stylists, funeral homes, etc. are charged the higher flat rate.

More than \$100,000/year in sales:  Here the Commissioner uses a flat rate plus a percentage of sales. Your revenue tax could be a flat fee of \$30 to \$100 plus upwards of 1% of any revenue in excess of \$100,000. As an example, if your flat rate is \$45, and your percentage tax is .0078 of revenue in excess of \$100,000 and you had sales of \$479,278 in the calendar year; then your tax is computed as follows:

Flat rate –                                                              \$45.00
% of revenue –
Total revenue                              \$479,278
Threshold or \$ Minimum             100,000
Taxable amount                          \$379,278
Tax @ .0078                                                      2,958.37
Total Revenue Tax                                           \$3,003.37

It is important to understand that each state has their own respective definition of revenue. In my state, revenue equals total sales less adjustments, and less returns from customers. Notice that it does not equal every sale tallied but allows for returns or discounts to the customer. In effect, the state is identifying revenue as the actual final amount of cash you deposit to the bank account from the sales of your products and/or services. This is important because you need to fully understand the definition.

Now for an interesting transaction standard, in the large ticket item industries such as auto, RV, ATV, marine boats etc., this revenue tax is included on the bill of sale. Go look at your bill of sale from your auto purchase from a dealership. You’ll see the tax passed onto you! If you buy a \$40 item at the store, you don’t see an extra line item for that same tax. To me it is a slight of hand in the way business is conducted. One of my blogs in the retail section is entitled Retail Sales: There are No Rules . You can understand why for these industries, if sales run into the millions, the revenue tax can get to be a really big expense for the company to absorb. They customarily pass this tax onto the customer. In the higher transaction count industries such as grocery stores or shoe stores, you can’t really add this line item to each receipt. Furthermore, your competition doesn’t do this and it could drive the customer away if they discover you include this in the sale. There are customs in addressing this tax. I would suggest to you that if you own a business with very few but very expensive transactions similar to dealerships, I would make this entry a standard on my bill of sale to the customer. If the customer asks, just explain it to them. Some examples of other industries this would apply to include:  landscaping, heating and A/C installation, appliance sales, furniture stores etc.

Note:  In some states, real estate improvements are excluded from this tax because the real estate is taxed separately. Ask your accountant to identify this for you.

I also explained that the registration process triggers the personal property tax from the local Commissioner of the Revenue. I’ll address this issue in another article.

As you can see, this specialty tax has a set of rules onto itself.  It can also get expensive and as a small business owner, if you understand the situation, you can deal with the costs and include this in your pricing model.  Act on Knowledge.

## Value Investing

Do you want to learn how to get returns like this?

Then learn about Value Investing. Value investing in the simplest of terms means to buy low and sell high. Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.

There are four key principles used with value investing. Each is required. They are:

1. Risk Reduction – Buy only high quality stocks;
2. Intrinsic Value – The underlying assets and operations are of good quality and performance;
3. Financial Analysis – Use core financial information, business ratios and key performance indicators to create a high level of confidence that recovery is just a matter of time;
4. Patience – Allow time to work for the investor.

If you are interested in learning more, go to the Membership Program page under Value Investing section in the header above.

Join the value investing club and learn about value investing and how you can easily acquire similar results with your investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each member goes through three distinct phases:

1. Education – Introduction to value investing along with terminology used are explained. Key principles of value investing are covered via a series of lessons and tutorials.
2. Development – Members are taught how pools of investments are developed by first learning about financial metrics and how to read financial statements. The member then uses existing models to grasp the core understanding of developing buy/sell triggers for high quality stocks.
3. Sophistication – Most members reach this phase of understanding after about six months. Many members create their own pools of investments and share with others their knowledge. Members are introduced to more sophisticated types of investments and how to use them to reduce risk and improve, via leverage, overall returns for their value investment pools.

Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:

• Lessons about value investing and the principles involved;
• Free webinars from the author following up the lessons;
• Charts, graphs, tutorials, templates and resources to use when you create your own pool;