|
Minimizing
Ohio Sales/Use Tax
By
Steven A.
Dimengo, JD, CPA, MT
 With
Ohio looking to its sales/use tax to bring in
more revenue, now is a good opportunity to confirm
you are taking advantage of available exemptions
from the tax due on otherwise taxable property
or services.
Exemptions from tax are available
with respect to a number of transactions, operations
or items, including the following:
- property or the benefit of the service being
resold;
- property used in manufacturing, processing,
assembling, mining, refining and reclamation;
- property used in the rendition of public
utility services;
- packaging materials and equipment;
- food preparation;
- casual sales;
- property used in farming, agriculture, horticulture
or floriculture;
- commercial fishing property;
- property used in production of magazines
distributed as controlled circulation publications;
- property used in graphic matter production;
- property used in highway transportation
for hire;
- certain medical supplies and equipment;
- property used in egg preparation;
- capitalized research and development equipment;
- equipment used in certain warehouse or distribution
centers;
- certain advertising materials used in making
retail sales;
- property used to fulfill a warranty, maintenance
or service contract; and
- property used in generating, transmitting,
or distributing electricity for use by others.
Some of the exemptions have conditions
associated with them. If you think any
may apply, please call us. We would be
happy to provide further guidance.
Steve Dimengo is a Shareholder
and member of the Taxation & Employee Benefits
Section of the Business Law Practice Group.
He can be contacted at sdimengo@bdblaw.com
or 330.258.6460.
Whose Cost
Is It?
By
Joel H.
Mirman, Esq.
 A
recent decision in New York Federal District
Court could have expensive consequences for
companies involved in a lawsuit. The potential
costs are related to the production of electronically
stored data when required as part of the discovery
process.
In Zubulake v. UBS Warburg,
2003 WL 21087884 (S.D.N.Y. May 13, 2003), the
Plaintiff was aware of additional responsive
e-mail, beyond what Defendant originally produced.
She therefore requested that the Defendant search
its archival media for "[a]ll documents concerning
any communication by or between UBS employees
concerning Plaintiff." Defendant argued
that this type of electronic search would cause
undue burden and expense and requested that
the court shift the cost to the Plaintiff. In
making this request, Defendant cited the decision
in Rowe Entertainment, Inc. v. The William
Morris Agency, 205 F.R.D. 421 (S.D.N.Y.
2002).
In its decision in the Zubulake
case, the court modified the factors established
in the Rowe case. To avoid disproportionate
cost shifting away from a large defendant, the
court modified the Rowe test by adding
two factors and removing one. The resulting
factors are as follows:
- The extent to which the request is specifically
tailored to discover
relevant information;
- The availability of such information from
other sources;
- The total cost of production compared to
the amount in controversy;
- The total cost of production compared to
the resources available to
each party;
- The relative ability of each party to control
costs and its incentive to do so;
- The importance of the issue at stake in
the litigation; and
- The relative benefits to the parties of
obtaining the information.
These factors should not be weighted
equally; the court listed the most important
first. Applying these new factors in the Zubulake
case, the court ordered the Defendant to produce,
and to pay for the cost of producing, all responsive
e-mail on its optical disks and active servers.
In addition, Plaintiff was allowed to select
five backup tapes for review for relevant e-mail.
The court will perform the appropriate cost-shifting
analysis only after review of the back-up tapes
and quantification of the Defendant’s costs.
On the basis of the decision in
the Zubulake case, we recommend that
companies carefully consider how they store
their data. Plan ahead to minimize any production
costs that may arise during the discovery process
of a potential lawsuit.
Joel Mirman is a Shareholder
and a member of the Litigation Practice Group.
He can be contacted at jmirman@bdblaw.com
or 614.227.4264.
Can I Fulfill
Disclosure Requirements By Mailing A Disk
To A Prospective Franchisee?
By
Robert J.
Newbold, Esq.
 Our
franchisor clients face strict guidelines
for complying with the Federal Trade Commission
rules on proper disclosure to a prospective
franchisee. Typically, the disclosure
process was done at a personal, face-to-face
meeting between the intended purchaser of
a franchise and the company/franchisor.
With the popularity of the Internet, many
of our clients are posing the question of
disclosure through the Internet.
The current FTC Franchise Rule
does not directly address advertising or Internet
activities. The FTC’s Notice of Proposed
Rulemaking to amend the FTC Franchise Rule
(“Proposed Franchise Rule”), on the other
hand, has a forward-thinking provision addressing
Electronic Disclosure Documents.
FTC Advisory Opinion
In an advisory opinion issued
in 1997, the FTC addressed the issue of whether
a franchisor could comply with the FTC Franchise
Rule by delivering a disclosure document via
computer diskette. While recognizing
that a computer diskette containing a word
processing form of the disclosures could be
as clear, concise and legible as a hard copy
and could save money for the franchisor, the
FTC expressed concern about potential harm
to prospective franchisees if they could not
review the disclosures easily and fully.
The FTC said a franchisor could satisfy the
Franchise Rule by delivering a computer diskette
only if six conditions were met.
First,
the prospective franchisee had
to have the option to decline receiving the
disclosure document via a computer diskette.
Second,
the franchisor had to disclose
the computer system and word processing format
used to create the electronic version.
Third,
if he determines later within
a reasonable time that he cannot readily review
the disclosures, then the prospective franchisee
must be able to obtain a hard-copy version.
Fourth,
the face of the computer diskette
should identify the franchisor and the issuance
date of the disclosure document.
Fifth,
the face of the diskette should
identify the subject matter of the diskette,
together with a notice taken from the cover
page “INFORMATION FOR PROSPECTIVE FRANCHISEES
REQUIRED BY THE FEDERAL TRADE COMMISSION.”
Sixth,
each diskette should state its
chronological number and the total number
of diskettes.
FTC Internet Notice
On May 6, 1998, the FTC published
a request for public comments in the Federal
Register entitled “Interpretation of Rules
and Guides for Electronic Media” (“FTC Internet
Notice”). The FTC proposed to issue
a policy statement regarding the applicability
of the rules and guides to new forms of electronic
media, such as e-mail, CD-ROMs and the Internet.
The proposed policy statement
would clarify (1) that rules and guides that
apply to representations generally without
reference to, or limitation on, the medium
used to disseminate them apply equally to
electronic media representations, and (2)
that rules and guides that specify how or
where representations are disseminated are
broad enough to apply to electronic media
representations.
Proposed Franchise Rule
The proposed Franchise Rule provisions
build on and expand the advisory opinion.
Proposed Section 436.7 sets forth instructions
that will enable franchisors to comply with
the disclosure obligations of the FTC Franchise
Rule electronically. According to the
FTC, the proposed FTC Rule provision has:
two new, modest requirements: (1) that franchisors
using electronic media provide prospective
franchisees with a paper summary document
containing an expanded cover page, table of
contents, and acknowledgment of receipt, and
(2) that franchisors retain a specimen hard
copy of each materially different version
of their disclosures.
Proposed Section 436.7(a) requires
the franchisor to obtain the prospective franchisee’s
express consent to accept the disclosures
in an electronic format and that prospective
franchisees always have the right to obtain
a paper disclosure document from a franchise
seller up until the time of sale. The
FTC says it is concerned that fraudulent operations
will gravitate toward electronic media as
a new way to avoid pre-sale disclosure.
The FTC says it expects the franchisor to
disclose in advance the medium used to furnish
its disclosures (such as computer disks, CD-ROM,
E-mail or Internet) and any specific applications
(e.g., Windows 95 or DOS or a particular Internet
browser) necessary to view the disclosures.
Because the FTC is concerned about fraud,
franchisors must allow traditional paper copies
to remain available as an option up until
the time of sale. The FTC wants the
prospective franchisee to be able to easily
read a disclosure document.
To ensure that prospective franchisees
know they can get a paper copy, Section 436.3(g)
of the proposed FTC Rule requires franchisors
using electronic disclosure to add a statement
to their cover page alerting prospective franchises
receiving an electronic version that they
have a right to obtain a paper copy:
You may have elected to receive an electronic
version of your disclosure document.
If so, you may wish to print or download the
disclosure document for future reference.
You have the right to receive a paper copy
of the disclosure document up until the time
of sale. To obtain a paper copy, contact
[name] at [address] and [telephone number].
Deviating from the FTC’s advisory
opinion, Section 436.7(b) of the proposed
FTC Rule requires a franchisor to provide
a paper summary document containing only three
items: (1) the cover page, (2) the table of
contents, and (3) two copies of the Item 23
receipt, with instructions to acknowledge
receipt through a signature. The FTC
believes this will serve two anti-fraud purposes:
(1) advance notice of the information being
disclosed, and (2) proof of receipt.
The FTC further believes the paper summary
document would alert prospective franchisees
to the fact that they should receive disclosures
and will have 14 days to review them. The
paper summary document would also give the
franchisor’s Internet address and information
on how to get a paper copy.
Robert J. Newbold is a Shareholder
and member the Franchise Section of the Business
Law Practice Groups. He can be contacted
at rnewbold@bdblaw.com
or 330.491.5258.
 Congratulations
to Thomas
A. Hess, Esq. of Buckingham ColumbusSM,
who has been appointed by Governor Bob Taft,
to serve a second three year term to the Board
of Examiners of Nursing Home Administrators.
His term will expire in May 2006.
Save the Date for these Upcoming
Presentations:
On July 16, 2003,
Mark D. Frasure and
Christopher S. Humphrey (Buckingham CantonSM)
will be speaking on “Medical Records
Documentation” at “Grand Rounds” at Akron
General Medical Center in Akron, Ohio. Please
contact William Gardner for additional information
at 330-384-6643.
On July 14, 2003,
Phylip J. Divine (Buckingham AkronSM)
will give a presentation on “Estate Planning”
sponsored by the Golden Buckeyes at the
Middlebranch Grace Brethren Church. Please
contact the church office at 330.499.6691
for additional information.
On August 26, 2003,
Gerald B. Chattman,
David L. Drechsler,
Natalie F. Grubb,
Douglas Paul,
John P. Slagter (Buckingham ClevelandSM),
and
David J. Hrina (Buckingham AkronSM)
will be presenting at the “Homeland Security
Great Lakes Region Conference 2003.” Please
visit
www.scaa-spill.org or contact Mark Shay
at
marcs@scaa-spill.org for additional
information.
Steven A. Dimengo (Buckingham AkronSM)
will be a presenter at the following:
August 19, 2003, Lorman Educational Services
Continuing Education Services Seminar in Beachwood,
Ohio. His topic will be “Sales and
Use Tax for Manufacturers.” Please
contact Lorman Educational Services for additional
information at
www.lorman.com or 888.678.5565.
October 20-21, 2003, The Ohio Society of
Certified Public Accountants 2003 Federal Tax
Planning Symposium – “Ohio Sales/Use Tax:
Recent Trends, Development and Planning Opportunities.”
Please contact The Ohio Society of CPA’s at
www.ohioscpa.com
for additional information.
October 29, 2003, the University of Akron
Tax Conference - “Ohio Sales/Use Tax:
Recent Trends, Development and Planning Opportunities.”
November 18, 2003, Lorman Educational Services
Continuing Education Services Seminar in Cleveland,
Ohio. His topic will be “Tax Issues
Facing Small Businesses.” Please
contact Lorman Educational Services for additional
information at
www.lorman.com or 888.678.5565.
On September 25, 2003,
Phylip J. Divine (Buckingham AkronSM)
will be a presenter at the National Business
Institute sponsored “Adoption Law in Ohio.”
Please contact the National Business Institute
for additional information at
www.nbi-sems.com or 800.930.6182.
Out and About – Recent Presentations:
Business Practice Group
Candace Campbell Jackson (Buckingham ClevelandSM)
gave a presentation at the Cleveland Bar
Association Seminar titled “Representing Nonprofits”
in Cleveland, Ohio.
Employment
Law Practice Group
Gerald B. Chattman (Buckingham
ClevelandSM)
spoke on "The Provider Perspective
on Managing Risks" at the Consortium Against
Adult Abuse sponsored by the Western Reserve
Area Agency On Aging in Cleveland, Ohio.
Health Law Practice Group
Donald A. Antrim (Buckingham ColumbusSM)
presented “Malpractice Crisis and the
Tort Reform: As it affects the delivery
of Eyecare Services” at a seminar sponsored
by Columbus Ophthalmology Associates and Anadem
Publishing on Hot Topics in Eyecare.
Litigation Practice Group
William B. Leahy (Buckingham ClevelandSM)
was a presenter at the United States District
Court, Northern District of Ohio course for
mediators.
Real Estate & Construction Law Practice
Group
Robert
A. Hager,
John P. Slagter (Buckingham ClevelandSM),
and
David W. Woodburn (Buckingham AkronSM)
were presenters at the Buckingham Annual
Real Estate & Construction Law Seminar held
in Akron, Ohio. Their topics were
“Fairness in Contracting Act: ‘Level the
Playing Field,’” “Legal Strategies for Real
Property Tax,” and “Case Law Update.”
Robert A. Hager (Buckingham ClevelandSM)
presented “Litigation of Liens” at
the Ohio State Bar Association sponsored seminar
titled “Real Estate Litigation” in Cleveland,
Ohio.
Donald B. Leach, Jr. (Buckingham ColumbusSM)
presented “Liens and Encumbrances Affecting
Real Estate” on behalf of the Ohio
State Bar Association Continuing Legal Education
Institute in Columbus, Ohio. He also spoke
on “The How’s and Why’s of Paperwork”
at the Ohio’s Mechanics’ Lien Law Seminar sponsored
by The Builders Exchange of Central Ohio.
Craig B. Paynter (Buckingham ColumbusSM)
gave a presentation titled “Litigation
of Liens” at the Ohio State Bar Association
in Columbus, Ohio.
John P. Slagter (Buckingham ClevelandSM)
spoke at Boundary Law in Ohio, sponsored by
the National Business Institute. His topics
were “Water Boundaries, Ethics, and Handling
Right-of-Way Problems.”
Trusts & Estates Practice Group
Jeffrey A. Halm (Buckingham CantonSM)
presented at the North Canton Medical Clinic
Foundation on “Risk Management and Asset
Protection Planning.”
If you are interested in obtaining information
on upcoming seminars or would be interested
in having speakers from Buckingham, Doolittle
& Burroughs, LLP make a presentation to
your organization, please contact: Lorna Henderson,
Senior Marketing Coordinator
lhenderson@bdblaw.com or 800.686.2825
ext. 473.
At BDB we are always improving our processes
so that we operate efficiently and effectively.
Please let us know how you like our new broadcast
format. E-mail: bdb@bdblaw.com
Phone: 330.258.6473 Fax: 330.252.5473.
Thank you.
|
In
this issue of the Advisor, we focus on
steps your business can take to lower its expenditures
in several areas and on necessary considerations
when your business stores and provides its data
in an electronic format. In the first article
Steven A. Dimengo, Buckingham AkronSM,
identifies a range of available exemptions from
sales and use tax for certain property and services.
Joel H. Mirman, Buckingham ColumbusSM,
explains how your business can avoid potential
costs by storing data in a form that allows
inexpensive retrieval in the event of a lawsuit.
In the final article, Robert J. Newbold, Buckingham
CantonSM,
in an update on Federal Trade Commission requirements
for disclosure to potential franchisees, discusses
what franchisors must do if they decide to mail
disclosures on disk.
