Sales Tax On Electricity: Does Your Business Really Owe It...Or Not?

As utilities auditors and consultants, one of the most common overcharges we encounter is in the area of sales tax. Our consultancy is in New York State, where some commercial uses of electricity are taxable and some are not. Yet we find that many non-taxable uses of electricity are taxed, anyway. Evidently electric companies -- at least some of them -- elect to play it safe:  when in doubt they collect the tax and turn it over to the taxing authority, whether it’s owed or not.

Many business managers and financial people, who watch most costs like hawks, routinely approve electricity bills without knowing for certain whether the charges are correct. They don’t understand electricity bills, so they assume electric companies do the correct thing, and that their bills are error-free.

Not so.  We encounter all kinds of errors and overcharges -- real whoppers, some of them -- even going back decades, with improper sales tax charges high on the list. (See “Electricity For Less: How Your Business Can Cut Costs And Stop Overcharges” at http://www.saveelectricitycosts.com)

Most electric bills reflect charges for sales tax, or possibly a number of different sales taxes and surcharges. The patterns of taxes can vary considerably from one taxing authority to another.
In many areas, specific classes of users -- such as certain manufacturers, restaurants, nonprofit organizations and others -- are exempt from some or all sales taxes on electricity. In general, electricity used in the production of physical items is exempt from sales tax -- in those taxing authorities that allow exemptions. At this writing, over half of our states have enacted exemption legislation.

Some exemptions are based on what is called predominant use. Using this approach, if more than half the usage a meter measures is for an exempt activity, then all the billing for that meter is exempt.

Under the percentage of use approach, sales tax is applied only to that portion of the organization’s total electricity consumption being used for non-exempt activities. The remaining portion, used to support exempt activities, is not taxed. In some states, certain kinds of organizations are exempted entirely.

Because sales tax statutes across the nation change often, check the latest information in your state. Ask a qualified representative of your electric company, or better still, get a copy of the current sales and use tax statute from the sales tax division of your state’s department of revenue and taxation.

To determine the amounts of electricity being used on exempt and non-exempt activities, you may be required to have a study done by a licensed engineer. The engineer will measure the watts being used by each device that consumes electricity, and produce a usage study projecting exempt and non-exempt usage. (Some states, including New York, allow you to make this study yourself, without an engineer.) The electric company will collect sales tax from you based upon the result.

If you have been overtaxed in the past, apply to the taxing authority -- not the electric company -- for a refund. They will advise you what paperwork to submit, and how far back your refund may go.

The point here is:  if your organization is being charged sales tax, don’t just assume you owe the tax. Check the law and make certain the charge is legitimate.

Save Face, Time, and Money on Your Next IT Project

How many times have you been involved in a project where a newly-released piece of software required an immediate enhancement because the right people were not “in the loop”?  This is an example of how poor communication costs money and damages the reputation of an Information Technology (IT) Team.

Well-managed communication can increase the rates of success on your IT projects by improving relations between you and your customers and decreasing the odds of hasty last-minute enhancements, thus saving face, saving time, and saving money.

Most developers are familiar with technical writers, who produce documentation.  While these writers are important to your project, they do not typically handle communication.  That requires a person well-versed in communication planning and execution:  the communication specialist.

A communication specialist will:
• determine your communication objectives (educate?, gather specifications?, change behavior?)
• identify the people who have and need information about your project,
• identify the best way of reaching these people,
• and build a list of key messages.

The communication can occur through many channels, such as focus groups, face-to-face meetings, status reports, newsletters, email messages, web sites, PowerPoint presentations, or phone hotlines.  Communication can also be executed in less formal ways, such as establishing mail lists and selectively copying the appropriate people on relevant email.

The communication specialist brings all this together in a communication plan.

Then the communication specialist will execute each communication, according to the established timeline.  And of course, he or she will adjust the communication plan as the project evolves.

Well-planned and managed communication is crucial to how your organization is perceived and it will have a direct impact on your project.  Adding a communication specialist to your next IT project will increase your odds of success.

Scheduling Retail Employees

Scheduling my team has always been one of my least favorite tasks as a retail manager. It’s tedious, it takes hours and even when I think I have it right, I probably don’t. What makes scheduling a challenge is that you are balancing the demands of individuals on your team with the demands of your business. This can be a very time consuming and frustrating.

Lets say you complete a schedule which took you 2 hours to create. You have carefully made sure everyone has at least two days off, and all approved requests for days and vacations have been honored. You post the schedule and then you are informed that someone on your sales team needs different days off. This may seem simple, however you have to virtually build another schedule, to make the adjustment. You will have to review each individual and day again to insure that all needs are met. Don’t you hate when that happens.

How can you make this process simpler and less tedious. My first solution was to train my assistant to do schedules and to delegate this task to him. Problem solved. Well, not quite. I was freed from scheduling, but the problem still existed. Instead of me spending 2 to 3 hours per schedule, my assistant was. However, as a result of him doing it I learned one of the solutions to our problem - “Set Schedules.” When he took over the schedule he partnered with each salesperson to ascertain what was their preferred schedule. He then created a schedule primarily based on business needs and secondarily based on individual preferences.

This worked out great. Some people prefer to work mornings, some evenings, some liked weekends off, while others saw weekends as money days. I was always averse to set schedules since I felt it locked me into giving someone certain days off. However, my team understands that in retail the schedule will vary from time to time. They also understand that evenings and weekends are when most retail business is done. They understand this, because we communicate these ideas regularly - which is the next solution.

If you communicate and inform your team and they communicate and inform you, many of your scheduling woes will vanish. I ask that my team inform me of all requests at least two weeks in advance and that they inform me of vacation requests 4 weeks in advance. I in turn publish 2 weeks of schedules at all times. During meetings I let them know that schedule is variable and I also inform them of days that I will need extra coverage. I emphasize dates in which no vacation request will be honored.

Communicating requests officially vary from company to company. One company I worked for actually had a form for employees to fill out to officially request days off. Strict as this may sound, it worked well. It gave me and the employee a way to keep track of approved requests. Once approved, I enter the request in my planning calendar and then file it in the “Approved Requests File.” This is a tidy way of managing requests.

I approve requests on a first come first serve basis. My team knows that asking is not a guarantee, however they also know that I will bend over backwards to give them off the days they want. To keep the approvals fair I restrict hoarding by allowing only two consecutive premium requests. For example, If someone requests Memorial Day off, 4th of July off and Labor Day off, they may get the 1st two, but may not get the 3rd - even if they were 1st to request it. By doing this I limit one person from hoarding all the premium days off. My team understands and agree that it’s not fair for one person to get every premium day off. This keeps requests fair and balanced.

People want to have lives outside of work and you should respect and encourage it. Even though I ask for a two week minimum on requests I will approve a request on shorter notice - rules are made to be broken occasionally.

My priority when scheduling is that I want to have my best people work on the busiest days. In other words my focus in scheduling is driving business, through scheduling. In commissioned environments this is great for your top people but it sucks for your laggards. I have had salespeople get downright indignant over not getting more Saturdays and evenings. In hourly environments it may be a harder sale to your better reps as to why they work a larger share of weekends, for example. You’ll have to find the balance.

Scheduling is one of the toughest tasks you have because you have to manage competing personal demands against the needs of your business. How will you manage the wills of your team and prioritize those against the needs of your business. This time consuming task is manageable if you follow a few proven guidelines:

1. Use a Set Schedule whenever possible
2. Set Scheduling rules & guidelines
3. Communicate the guidelines
4. Document requests
5. Make the request process fair
6. Make business the priority

Selecting Salespeople From Outside Your Industry

There is an old saying in the computer world that dates back to the days of mainframes and terminals. These early computers cost tens of thousands of dollars and there were a handful of competitors in that market space. The dominant player was IBM who was often the highest priced option even though the competitive solutions were fairly similar. IBM’s market-leading position created a security blanket for buyers that developed into a common phrase – “Nobody was ever fired for choosing IBM.”

Unfortunately, this conventional wisdom permeates sales hiring today. “Nobody is ever fired for hiring salespeople from within their industry.” Sales is one of, if not the toughest positions within a company to successfully fill. Many companies struggle even with internal sales candidates. What hurdles do salespeople present to hiring?

First, consider hiring for a different position, say a computer programmer. The first hard skill assessment is how well the candidate knows the programming language. The programming language is the same (.net, java, C, etc.) no matter which company employs the programmer. The expertise of their skill set can be determined through a comprehensive interview. Usually a skilled programmer will still be considered even if they do not possess direct industry experience in the hiring company’s market. Their computer programming skills are transferable.

Successful salespeople have a blend of hard and soft skills that are difficult to define and even tougher to measure. Companies often incorporate “self-starter,” “motivated,” “team player” and other buzzwords into their employment ads without clearly defining what traits are most important to the position. Many times these traits are merely window dressing as the company naturally gravitates to candidates with direct industry experience. The assumption is that the candidate knows how to sell in our market so they will be easier to manage.

This is a flawed approach. No matter how intricate your market or complex your product or service, teaching someone how to sell is far more difficult. Companies hire salespeople to sell. The company’s focus should be on finding specific sales talents.

--SALES PROCESS--
The method by which a salesperson maneuvers a prospect into a customer is essentially their skills of the selling trade. This process is far more important than their industry experience. Experience simply shows you where they have hung their hat over time. Sales process is the far better predictor of how they will perform for your company.

Some process-oriented topics to pursue with sales candidates:

-Have them walk you through their standard sales process.
-What does a good prospect look like in their current role?
-At what point do they attempt to close a prospect?
-How long is one sales cycle? What do they do to try and shorten that cycle?

Strong sales candidates are able to explain how they acquire new leads, how they qualify them and how they close them. This process should be wrapped around their company’s value proposition. Pay close attention to theoretical answers as opposed to experiential answers. Theories are for science. Real-world skills are for sales. As long as the hiring company has clearly defined their sale, they are able to ascertain if the candidate’s skills are transferable to their sale. This information is far more valuable than assuming sales skills based on past industry experience.

--QUALIFYING--
If overall sales process is the first piece of the puzzle, qualifying ability is second. Successful selling pivots on the salesperson’s ability to qualify opportunities and discover the prospect’s potential. Obviously there are other important aspects, but none supersede the skill of efficiently determining a prospect’s need, budget, timing, decision process and alternatives.

The key here is to look for similarities between your typical sale and the candidate’s abilities. Topics to address:

-What is their current company’s value proposition and how do they put it in play?
-What is the typical buying process for their prospects? How do they navigate through that process?
-What are the 3 most common objections they have to overcome? How do they respond to them?
-How many competitors do they have to beat to get the deal? Who is their toughest competitor and what adjustments do they personally make to beat them?

Focusing on qualifying topics like these provides a fairly detailed picture of their qualifying abilities. A sales candidate with strong, transferable skills will clearly stand out. At this point, we would recommend assessing the strongest candidates to objectively measure their qualifying skills and aptitudes including empathy, self confidence, problem solving and listening ability. The sum of this data would identify candidates who have the potential to exceed expectations at your company.

--UTILITARIAN MOTIVATION--
86% of the top-performing salespeople in any market, industry or geography share a common motivation – a desire to receive a return on their investment of resources (money, time, effort, etc.). These salespeople are driven to utilize resources to accomplish results while gaining a measurable return on that investment of resources.

Successful selling requires people who can efficiently determine which prospects will provide the greatest return proportionate to the effort. This utilitarian drive is ideal in selling. A strong salesperson is constantly sorting the puzzle pieces of information they have gathered during the selling process and seeking out the remaining pieces to either close the deal or find a new prospect.

Hiring salespeople who do not have the utilitarian motivation is high risk to say the least. Other motivations include a desire to help people, become an expert, be in a position of power or establish rules for others to follow. All of these motivations have a noble purpose, but they are not the primary motivation behind the vast majority of successful salespeople.

Sales process, qualifying ability and a utilitarian motivation are 3 fundamental aspects for which to screen salespeople from outside of your industry. The finer points can be assessed for overall fit once these 3 areas are identified. Candidates from outside your industry bring different ideas and approaches while not being constrained by stereotypical sales approaches that can permeate a specific industry.

Clearly the ideal candidate has strong sales abilities and direct industry experience. Yet, too often companies become intoxicated with a marginal, but industry experienced, sales candidate in spite of their deficiencies. There is a liability to hiring only from your industry. Instead, hire for talent first and avoid the experience-only trap that leads to recycling mediocrity.