Merger math: how it adds up for you
By Robert M. Baldwin
Nearly 40 years ago, my family moved to Charleston. During that time, the Holy City seemed to be a small town, its surrounding communities almost rural. But then came Hurricane Hugo and Charleston was put on the map overnight. Ever since, the city has been fulfilling its growth destiny. The “Charleston secret” got out once again during the pandemic, leading even more people to move to the Lowcountry.
With the influx of people, came the influx of business — and business growth. At one time in the not-so-distant past, grocery stores drug stores and retailers were primarily owned locally. When we survey the small business landscape today, it’s amazing how many groups have either merged, grown or acquired other businesses, not to mention the amount of organizations that have not only gotten larger, but become a national brand. Why would that be?
When a business sets forth to serve a larger group of people, things like “comfort zones” and “the way things were” soon become a thing of the past. Instead, a kind “strengths, weaknesses, opportunities and threats” (SWOT) analysis takes place, and while assessing and praising the strengths built within the company is vital, it is just as important to evaluate opportunities of growth for our clients. Our thought process was simple — as the city grows, shouldn’t our team?
And that’s what we did. This year, we merged with Draffin Tucker and now serve Georgia as well as the Palmetto state. When competing across state lines, it’s necessary to gain additional knowledge from other markets to meet the needs of the clients. In the national economy, it’s necessary to have additional resources to respond to the regulatory environment imposed on all of this. We have an alphabet soup of federal agencies that govern our lives, and no one wants to go afoul of the law. Beyond the federal laws we have a large group of state and local laws. Learning and operating within all these laws require size to be able to gain the knowledge to operate. It’s almost impossible for one person to figure it out by themselves.
In the world of taxation, it has become very complex dealing with the various tax matters that our citizens encounter here in South Carolina. For example, individuals operating their own business through some form of web-based economic commerce learn that they not only have to deal with local taxes but also with the taxes of those states in which they operate. Recently, the Supreme Court declared in South Dakota v. Wayfair, Inc. that all states could collect income and sales taxes from businesses located in other states who are making use of what we now call the “economic Nexus.”
This means that if you have a web-based business in S.C. and you sell to customers in other states, it’s possible that you may owe income taxes and sales taxes to those states. Further, it’s not uncommon for individuals to have investments which are located across a multitude of states. These investments report income by state; therefore, individuals often filed taxes for the United States government and S.C. state tax and many more states.
Fifty years ago, commerce was much simpler and other than ordering from mail order catalogs, most sales were local. And then of course by default, taxation was simpler, too. By contrast, today’s system requires “an all hands-on-deck” approach, hence the reason why combining forces with Draffin Tucker only furthered our efforts.
In my 40-plus years of practicing in the world of taxes, I have been employed by an international accounting firm, a family office, a local accounting firm and now an interstate accounting firm. My recent move reflects a recognition that the practice of accounting today requires larger firms to address the complex tax matters of today’s clients. It takes a team to be able to address the many different taxes that are imposed in today’s complex society — our tax system today includes income, property, sales, excise, inheritance, estate, corporation, business license, use, gift and generation skipping taxes. So, I close as I began: Once upon a time, the world was small and simple; today it’s complex and large.
Robert M. “Bob” Baldwin is a partner of Draffin Tucker and longtime contributor to the Charleston Mercury.
