When was the last time you considered your exposure to employee embezzlement and theft? Embezzlement deals with the misappropriation of a company’s funds by bookkeeping and accounting personnel and theft deals with the broader area of inventory shrinkage due to employee theft.
There are usually two major factors, which can cause an employee, who has otherwise been an honest and trusted employee, to suddenly become involved in an embezzlement or theft. The first is involvement with drugs by either the employee or one of the employee’s loved ones; the second is pressure created by an economic downturn.
Experience has shown that when a significant embezzlement or theft is discovered, it is usually a situation where the employee is a trusted person who has been with the company for an extended period of time. The employee has an exemplary work record, is dedicated, and is considered to be a “company person”. Additionally, if an employee did not have the implicit trust of the employer, the embezzlement or theft might not occur. The breakdown in internal control creates a situation where the dishonest employee can manipulate the system.
There seems to be considerable confusion concerning the new internet sales tax that went into effect on September 15, 2012. While it seems that there is a new tax popping up whenever we hear the news, in actuality this is not a new tax. All purchases on the internet have always been taxable if the same goods purchased from your local retailer would have been subject to the sales tax. Here’s ‘how’ and ‘why’ the new tax applies.
About 75 years ago California adopted a sales tax on retail purchases of tangible personal property, unless specifically exempted (i.e. most food). Almost immediately, retailers in towns bordering states without such a tax noticed dwindling sales as California customers crossed the border to avoid the new tax. California’s Legislature immediately responded by enacting the Use Tax Law. This new use tax was, and remains, the same rate as the sales tax and applies to the same transactions that would be subject to the sales tax if the goods were bought from a California merchant. The difference, however, is that the sales tax is imposed on the retailer and the use tax is imposed on the buyer.
For almost 75 years, anything purchased outside California that would have been taxed if purchased within California has been fully taxable and the customer was required by law to pay the tax to the State. Since the State of California does not have the resources to administer the identification and collection of the Use Tax from every California resident who buys goods outside the State, they required the out-of-state retailer to register, collect, and remit the customer’s Use Tax (if sufficient ‘nexus’ was determined). ‘Nexus’ is a term denoting a connection between the out-of-state retailer and the State of California. If this retailer uses California’s highways to deliver goods, or has salespersons, canvassers, repair persons, etc. that enter California, they are considered to be ‘engaged in business’ within California. Courts have repeatedly upheld the right of states to compel out-of-state retailers to comply with such laws. These out-of-state retailers who are engaged in business in California (or other states with similar laws), can be held fully responsible for the use tax owed by the buyers on all purchases either delivered by themselves or shipped common-carrier into California. If the buyer actually traveled to the retailer’s out-of-state location to pick up the goods, it would be solely the customer’s responsibility.