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Government Bureaucracy Rant: State of Indiana

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#1
Derek Tonn

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Hey all! I have something that has been chewing at me all day today that I was hoping to get out there and get it off my chest....while hopefully soliciting responses from other mappers out there related to either:

A. politely explaining to me why I am crazy and need to simmer down, or
B. giving me a little emotional support and climbing up on that soapbox with me! :P

Okay, we have a small public educational institution within the State of Indiana as a client. They hired us a few years back to do a campus map, then we didn't hear from them in 2+ years after successfully completing the initial job (went well, got paid on time, etc.). Then, that same institution calls us up this summer with a "rush project"......updating their existing map in time to meet a press deadline. No big deal, happens all the time around here. We tell them "sure, no problem!" as this is a very common request from clients, particularly in the summer as they are all gearing up for September 1 and the opening of classes. We finish the job and the client is happy. We send them an invoice for less than $200 for 3-4 hours of work.

30 days pass.....no payment. Not entirely unusual, as more than a handful of public institutions require about 3-4 extra hurdles and an expert knowledge of Origami in order to process an invoice. 60 days pass.....no payment. I send our contact a friendly email, asking her to check on the status of payment. A week later, I get a copy of a re-issued P.O. for the project. Okay, NOW we'll get paid on our rush-job, right? Wrong. 90 days pass.....no payment. Now today, about 115 days since we delivered the finished project and 85 days past due on our invoice, I get a letter from the Indiana Department of Revenue. They tell me that we have "outstanding Indiana sales/use tax liabilities" (?) and that they have filed a "protest against your recent or upcoming contract" (freezing payment) because our firm isn't registered for a retail merchant's certificate (nevermind that we don't do "retail" work). They also tell me that we need to complete something called a "BT-1 application" (probably for a fee...but wouldn't you know it? Their web site to access the application has been down all day, at least the URL on the letter they sent me.....unsigned without a contact person's name, just a big, nameless/faceless department and the number of a switchboard operator).

Here's the kicker though: they say we have to register to collect and pay sales tax in the State of Indiana if we want to collect payment on that job....AND they say in their letter:

Once you are registered for sales tax you will be required to file periodic sales tax returns even when you have no applicable sales subject to Indiana sales and use tax. Failure to do so could result in an estimated billing by the department.


So if I am understanding this correctly, one of the State's public institutions has been using our artwork for 3+ months, hasn't paid for it, and the State is likely going to CHARGE me to apply for the privilege to collect our <$200 invoice and make us file "periodic" sales and use tax returns.....sucking time/money away from other projects AND threatening to bill us if we don't file said "periodic" returns? They've apparently learned their lesson well from the State of Virginia, but that is an entirely different rant. :lol:

Here is where I REALLY wish that individuals could not get elected to state and local government (much less Federal office) unless they have some semblance of a clue related to economics. This is a poster-child of what is wrong with a lot of our governmental processes in the United States...as no one wins, and the only people who lose are ultimately the taxpayers of the State of Indiana. I'm sure other businesses who encounter this type of situation experience the following scenario:

1. Company does small amount of work for clients in the State.
2. Company is told by the State that they have to jump through 3-4 hoops and pay fees and fill out forms to get paid and do business in the State, in theory to generate more tax revenue and ease the burden of resident taxpayers.
3. Company tap-dances to appease the State, then makes sure to apply a healthy mark-up on any/all work done in the State's public sector going forward. A "nuisance tax", if you will.
4. Taxpayers of the State cover the additional shortfall (the difference between "nuisance tax" and mandated State fees).

If our local, county, state and federal officials would ever learn that these types of protectionist and bureaucratic practices do FAR more to hinder economic development and revenue than actually protect local interests, our cumulative governments could probably contract in size by at least 20-30 percent and actually free-up time for small business owners to generate INCOME TAX.....instead of trying to nickel and dime them to death, taking time (and money) away from their clients, their production, their sales and marketing efforts, their families, etc., we might actually get somewhere in this country. As it is, the lawyers and bureaucracies run our country....ruining it for the rest of us.

There, I've had my little rant. I'm giving SERIOUS thought to just saying "the heck with it", eating that <$200 invoice and telling our client to cease and desist from using our modifications (no pay, no usage rights). However, I'll probably "play nice" and call the Indiana Department of Revenue on Monday, jump through their hoops and fill out whatever forms that they require (assuming the fees don't exceed our invoice value, :rolleyes: ). The thing that I find to be sad though is that, the next time a public institution in the State comes calling, how could I NOT at least consider inflating our prices to cover the added time/hassle/taxes/fees? It's sad that I would even have to consider it....as the State charging additional fees would only end up costing taxpayers MORE money in the long run. I just wish that ONE politician, someday, would have that "Eureka!" moment and see the light of day related to economics and government policy one of these years.......

Grumpily Yours! <_<

Derek
Derek Tonn
Founder and CEO
mapformation, LLC

datonn@mapformation.com
http://www.mapformation.com

#2
Derek Tonn

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Another quick follow-up thought that I forgot to mention before: when it comes to services providers such as map designers, "nuisance taxes" (I'm being a little loose/playful in my language there) are actually probably very valid and appropriate! For example, if a client asked you to bid on 100 hours of map design work, but you know that because of the bureaucracy they are governed by, you will also have:

- an additional 2+ hours of phone calls/paperwork
- "periodic" (quarterly?) filings
- postage and maybe envelopes for said filings
- sales/use tax fees on gross earnings

.....then you almost HAVE to either account for those extra hours to process all the monkey-business, pass-through the actual costs of all that extra time/effort or raise your hourly fees. All of our rates might be "X", but what we are all REALLY after is net profit. If we need a net profit of _____ on a job to make it worth our while, you charge what you have to in order to earn that margin or you can't/shouldn't take the job.

Isn't that common sense? A business is going to charge what it has to in order to achieve a "net". "Gross" is meaningless, and any increase in expenses is going to drive prices up unless a company is in an industry that is very price-sensitive. Mapping isn't one of those industries, it seems. Yes, there is downward pressure on pricing (as in any industry). However, for a firm like ours, a client isn't going to stop working with us if we charge $200 or $225 instead of $175 or $185 for the type of work we do. I just feel bad to have to potentially "penalize" clients for the mistakes of lawmakers down at the State Capitol. :(
Derek Tonn
Founder and CEO
mapformation, LLC

datonn@mapformation.com
http://www.mapformation.com

#3
Hans van der Maarel

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That seems like a lot of trouble to go through just for a $200 invoice... If I were in your place, the next customer from Indiana would certainly see this reflected on their invoice (as "misc. exp." or something like that, read the bit on the black Disaster Area sunship in the Hitchikers Guide To The Galaxy to get an idea).

What amazes me is that this seems so obviously geared towards making a hassle for non-Indiana companies... makes me glad I'm in Holland: our provinces have a lot less freedom and even Europe-wide, things are sorted out better.
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#4
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Derek

C.O.D maybe? next time. e.g. visa payment.

I think for this one I would just bite the bullet. More trouble then it is worth it seems.

Also getting the facts before working in a specific State or Country etc... can save you a lot of headaches.

I always believed that as a service provider, you set the rules of payment under the laws of your place of business (?). They accepted your terms when you started the work? Then your client should be paying according to your rules not theirs. e.g. I pay my telephone bill according to rules set by my service provider not by my rules.
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#5
Derek Tonn

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C.O.D maybe? next time. e.g. visa payment.


Jacques,

I WISH colleges and universities would operate "C.O.D.", but if I drew a hard, bold line of that type, none of them would hire us. Either that, or they'd openly and blatantly violate the terms of that agreement anyway, a la "I'm 100 times bigger than you, so what are you gonna do about it?" ;)

The one "hammer" I hold over people's heads though if I have to worry about getting paid is the fact that copyright and/or usage rights do not officially transfer until we have been paid in-full for our work. No money, no rights to use the artwork.....and it is many, MANY times more expensive for a college to face the proposition of eating the costs of printing 20,000+ copies of their new maps than it is to simply pay their bills.

What's interesting in this situation though is that it is a "Third Party" (the State of Indiana) who is stepping in and mucking up the process. The State feels like they've been "punished" by not collecting <$10 in sales/use tax, so they try and take it out on me. I, in turn, feel wronged by our client's Accounts Payable department, who never notified me of any changes in state law related to this issue, nor was I ever asked to file any new forms or ??? this time around, so then I feel the need to "punish" our client by taking our artwork back or feel "punished" by not being compensated for our time.

All this over what will probably amount to being around $3-$5 in sales/use tax! Ridiculous, if you ask me. I'll be calling the Nameless, Faceless Bureaucracy later this afternoon to pursue this issue further, and will report back in this thread. B)
Derek Tonn
Founder and CEO
mapformation, LLC

datonn@mapformation.com
http://www.mapformation.com

#6
benbakelaar

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Not to say you're wrong in any aspect, Derek, but having formely worked at a state university, you must at least recognize the complexity of their finances and the rules governing them. I'll leave out the Greek mythological analogies for now :) .... The problem with state universities is that the "process chain" contains dozens of points of failure, as compared to b2b or p2p which might only contain 3-5 points of failure.

While I understand you feeling wronged and annoyed, I don't think you can pin it on any individual you dealt with, and even less the individual department you worked with. My girlfriend works for a state university/hospital, and you couldn't even imagine (seriously) the ridiculous processes that are in place, and the number of hands a single document has to touch to initiate a payment or approval - and to top it off, the complete lack of communication between all those hands and the person/department initiating the payment request.

Just my two cents.

#7
danielle

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Derek,

I feel your pain. I?ve had to fill out vendor forms, but was already registered for taxes so it wasn?t so complicated.

One question, though. Could this client be considered tax-exempt? Most work I?ve done for educational institutions was for groups with non-profit status. They give us a copy of their tax exempt certificate, and we don?t have to charge sales tax.

Not sure if this makes a difference regarding being registered with the state. But could be another ugly twist to the story to have to go through all that, for a client you?re not supposed to charge tax on to begin with.

Danielle

#8
Derek Tonn

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Ben,

I hear you. the "logical" part of me (especially as a person who worked in higher ed for eight years prior to starting my business, albeit private institutions) knows exactly what you are saying, but the "taxpayer", "emotional" and "free market economist" part of me sees that type of waste and inefficiency in government and wants to raise a little ruckus. I don't blame the Indiana Department of Revenue at all, as they are just implementing laws. It is the Indiana House/Senate/Governor who are to blame for enacting such a silly piece of legislation that is only going to cost taxpayers more in the end. In fact, I actually had a good conversation with a woman in the DOR this afternoon and I politely asked her, point blank: "How can your state government see this as an opportunity to encourage economic development and/or as an opportunity to lessen the tax burden placed on Indiana taxpayers?" She laughed, paused, and then said "we don't write the laws, but we do have to enforce them." :lol: What she was saying during our conversation, without saying, is that "we think it's silly too, but it's what they passed up at the Capitol, so it's what we have to do."

Danielle,

This particular filing requirement does not allow you to avoid sales/use tax even if your clients are 501c3 tax-exempt, as the vast majority of our clients are. Rather, it is essentially a tax on doing business within the State of Indiana, as best I can determine....at least if you want to work with public agencies. They have different tiers of filings and tax depending upon the type of license you are applying for, higher ed being only one of several options. Fortunately, they waive the fee ($25) to apply for a license if you are located outside of Indiana, at least within the public university section of their legislation. It's STILL a hassle though to have one more tax return to have to file at the end of every year, and a complete waste of time and taxpayer monies when you are talking about less than $5-$10 of actual tax or fees.

That's what I know for now! I reluctantly filled out the forms this afternoon. For anyone else doing business with public institutions within the State of Indiana though, consider yourself warned........ ;)
Derek Tonn
Founder and CEO
mapformation, LLC

datonn@mapformation.com
http://www.mapformation.com

#9
MapMedia

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Derek - Wow - I would follow-through with the paperwork as a learning process (what fun!!) and then collect from the client so you have some* satisfaction and the client can use the map. It will also inform the client there will not be any future hangups for you in the future - smooth sailing.

California has a similar system - whereas if you are a retail/service 'business' you have to file weekly earning statements - they are very simple forms - just pop it in the OUT box and your good to go :D

Hope this works out well for you!

#10
Maisie

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Does anybody know of other states that use this system?

#11
Derek Tonn

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Does anybody know of other states that use this system?


The State of Virginia has quite a bit of monkey-business related to contracts with public universities.....(eVA fees). It might be nice if one of us could locate some sort of "clearinghouse" for all the filings and busy-work that are required of all of us in the mapping business on a state by state (or province/country by province/country for areas outside the United States) basis. If I find any other information or filing requirements in other states, I'll be sure to post them in here. B)
Derek Tonn
Founder and CEO
mapformation, LLC

datonn@mapformation.com
http://www.mapformation.com




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