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Economy Opening… Stop… Start…

While everyone is eager to get the economy started, get back to work, get back to normal!  What we have seen this week with States and industry openings, may be a harbinger of the new “normal” at least for some time.

We will reopen but we may not be normal for a while

Since we know social distancing will stay in place for some months to come we can pretty much rule out crowded karaoke night at the local pub, or that big stadium rock concert you bought tickets to happening. 

A few states like Texas and Georgia began opening their economies in late April.  Almost immediately cases of COVID-19 increased in the Texas panhandle, due to outbreaks in meat packing plants amongst the approximately 12,000 industry workers.  Although all plants did not reclose, early response teams were sent to test and get a handle on the outbreaks.

Ford Motor Company opened its American auto plants just recently and then was forced to shut down two plants temporarily.  While one plant had a worker test positive and was shut down for disinfecting, another production line was halted because workers tested positive at a nearby parts plant – a link in their supply chain – and were unable to continue production.

We have seen the gigantic food industry in our country try to pivot their processing, packaging, and delivery resources to retail and away from restaurants – some of whom have shuttered completely, others still open but at a much reduced rate for take out only.  While a restaurant can shut down in a day, a farmer can hardly stop a radish from growing or a hog from fattening up, try as they might.  The food that would normally go to restaurants or big events now has no where to go.  And this affects both small and large farms.  It can take years to build up a customer base for your product.  Farmers can’t just knock on doors and sell those products to a few grocery stores, and so that means loss.  Not only loss of income but loss of investment dollars that just went to waste.  And a break – if temporary – in the food chain even after reopening the economy. farmers may not have had the wherewithal, nor the confidence, to replant and regrow the next round

As we begin to reopen we may see holes popping up in several supply chains, not just food.  What products should have gone into manufacturing or retail for sale are now hanging out in storage, or worse, have ended up in landfills.  Once production starts up across the country (and the world) there is no guarantee that raw materials and goods and even services will be readily available on time – which is what a well working supply chain requires. 

Besides supply chain kinks, possible worker absenteeism from outbreaks, businesses do not thrive unless they have that magical thing called the customer.  While continuing to wear masks and maintain social distance are on reopening plans, what can’t be planned is customer confidence.  A crowded waiting room once set a glow on restaurateurs’ hearts, but that sight might make potential customers flee.  Imagine the sight of a crowded waiting room in the doctor’s office.  It could be some time before customers are open for reopening. 

And like the great recession from a decade ago, while we can’t be certain how quickly the economy recover, what we can be sure of is that at least some businesses will never reopen.  We have already lost to the coronavirus Souplantation (and possibly all salad bars for all time), JC Penney retail, and at least 30 locations of Gold’s Gym that will never reopen.

Road Map to Opening

The news can be confusing. We hear that the nation is slowly reopening. Each state has a different plan, and county, and even each city! But a few clicks can keep you informed.

Information about your city is a few clicks away

Generally speaking this is a State issue. While the Federal government can give guidelines on how a State operates – including rules about opening businesses, wearing masks, etc. – only a State can make laws that govern behavior on the ground. Even each county and city is in charge of how reopening goes in their particular municipality. Though most States require that rules should not be less restrictive than the State level.

The United States Reopening Plan is located on the official White House website if you are looking to find out what the Federal plan looks like.

To find out what affects you, start with your own State’s website. In California, for instance, there are stages which you can find out about on the California road map site. Looking for your State’s official website is simple. The IRS has culled a list of each state government website so you can easily click through to the reopening plan.

If you are looking for more specific information on COVID-19 you can go to the CDC’s website where they list the websites for the health departments in each State.

And if you are looking for information about what is required in your particular city, you can easily find your city by searching the name and “official website” which will usually end with a .org. Particularly if you own a business it is important to get the information that directly affects you. And revisit often as this is a dynamic situation and you don’t want to be either behind or ahead of the curve.

Free Credit Reports

Normally all consumers are entitled to a free credit report from each of the three major reporting agencies once a year. This was provided by the Fair Credit Reporting Act (FCRA) which required Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months. And this is enforced by the Federal Trade Commission (FTC), the nation’s consumer protection agency.

Free weekly reports now available

Now, through April 2021, all three reporting agencies will be offering one free report weekly so that you can more closely monitor your credit. You can got to AnnualCreditReport.com to request your copies.

The credit agencies cull information from all your lenders and determine your credit worthiness based on how much you earn, how much you owe, and how much credit you have available to you. They also take into account your payment history, whether you have been chronically late, or always on time paying your creditors, medical bills, and sometimes even rent. It is important – especially if you are going to be requesting a new loan (credit card, mortgage, car loan, etc.) in the near future – to make sure all of the information on your report is up to date and accurate.

CA License Extensions for Cannabis Business

Although cannabis businesses cannot avail themselves of the federal relief response to COVID-19, the California state cannabis licensing boards are offering some relief. If your license expires between May 14 and June 30, 2020 you can request a deferment of up to 60 days from renewal fees.

Some cannabis businesses may be eligible for some fee and tax relief

Licensees must submit a written Request for Regulatory Relief to be considered for a license fee deferral. Deferral requests will begin to be accepting immediately. 

Although you can simply write requesting relief there is an optional form which can be filled out to request relief. All requests should be sent by email to MCLS@cdph.ca.gov. If not using the form be sure to include the business name, license, premises address, the length of the deferral request, and the name of the owner submitting the request.

Cannabis businesses may also be able to avail themselves of tax relief. The CDTFA has offered some tax deferrals to businesses.

Visit CA.gov to see the state’s response to COVID-19.

The Supply Chain

In the past few months you may have had more time on your hands, watched more news, or been reading more.  So, you may have heard recently this phrase “breakdown in the supply chain”.  We thought we would visit this topic with a broad overview of what is a supply chain.

The supply chain is vulnerable to disruption at every link

Raw Materials

There are several basic steps on the supply chain.  First, before anything else raw materials have to have been identified and cultivated.  If you are looking for an engagement ring – one of the first places on that supply chain must be mining for the diamond.  If it is a pair of pants then you have to start with planting cotton, let’s say for simplicity.

The raw material step may itself have several steps.  Let’s look at our pants.  The cotton grower may actually purchase seed from someone else, so the seed producer is the first step.  The grower of the cotton may not do anything else but grow it and pick it, then the next step is curing the cotton – cleaning and spinning it into thread.  That processor may not actually turn that cotton thread into fabric, so that material now needs to travel to a fabric processor.

Supplier

Now that we have all this fabric there needs to be someone to get it to the people who will make the pants.  Most processors are too small to be able to deliver their fabric all over the country, maybe even all over the globe.  That is where the supplier comes in.  A supplier usually focuses on getting goods from processor to manufacturer so they may have a wide variety of products they provide.  A fabric supplier may also deal in other things their customers will need – if they are delivering to their customer who will make our pants, they may also pick up buttons, and zippers, maybe even the paper for labels for the pants, they may even supply sewing machines and their parts.

Manufacturing

Once the manufacturer of our pants receives all the materials it needs it can go through the manufacturing process which will include things like design, sizing, cutting, stitching the parts together, and labeling for sale.

Distributor

Now that the pants are made, unless the company that made them is huge and can afford their own trucks and drivers, it will have to engage a distributor to deliver the pants to the retail stores that would like to sell them.

Like suppliers, distributors can carry many different products.  So, when they drop off those pants, they may also drop off shirts and purses to the retailer they have gathered from other different manufacturers.

Retailer

The retailer now has the pants and they need to find a way to sell them.  They have to find a way to get in touch with customers and encourage them to come in and look at the pants – so that means being in a location where there is a lot of foot traffic or advertising, get the word out to a wide variety of people.

Consumer

The consumer steps into the store, spots the pants, treies them on and likes them, decides to buy them and all is well in the world.  The supply chain has worked the way it was supposed to. Everyone happy.

On The Whole

Though it is called a ‘chain’ it is much less linear in a world economy and more like a web.  When the pandemic broke out in China, many factories were initially affected by workers not coming to work because they were sick.  That was a break in the manufacturing link of the supply chain.  All the businesses before and after that step are negatively affected.  If you have raw cotton, but the fabric processor doesn’t need it because the factory that manufactures the pants is shut down because too many people are sick, you are left with a lot of cotton and nothing to do with it.  If it doesn’t get processed it will go to waste.  If the processor has no one to sell to they can’t very well carry on processing cotton into fabric, they only have so much capital to spend and only so much storage space to hold on to unsold fabric.

On the other side, the customer will come into the store and find no pants on the shelves so they may walk away and go to another store.  The suppliers and distributors in between are equally affected. 

If there are supply chain disruptions all along the line, because of illness, or as with our “stay at home” orders, it puts the whole system in trouble.  Because supply chains for almost all products are increasingly global and web-like, what happens in other countries can really affect what happens in ours.  And all the workers along the line, at all the steps, are also consumers of our pants.  We really are all in this together, on a lot of levels.

New Credits Available Businesses

Employee Retention Credit:

The employee retention credit is designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

IRS offers help to businesses shut down by COVID-19

The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.

Qualifying employers must fall into one of two categories:

  1. The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  2. The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

Employers will calculate these measures each calendar quarter.

Paid Sick Leave Credit and Family Leave Credit:

The paid sick leave credit is designed to allow business to get a credit for an employee who is unable to work (including telework) because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.

The employer can also receive the credit for employees who are unable to work due to caring for someone with Coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable due to the Coronavirus. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay or, up to $200 per day and $2,000 in total.

Employees are also entitled to paid family and medical leave equal to 2/3 of the employee’s regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the family leave credit.

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through Dec. 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees.

How will employers receive the credit?

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

The IRS has also posted Employee Retention Credit FAQs and Paid Family Leave and Sick Leave FAQs that will help answer questions.

Updates on the implementation of the Employee Retention Credit and other information can be found on the Coronavirus page of IRS.gov.

Travel Now A Bust?

FTC says what you can do now.

If COVID-19 canceled your travel plans, you are likely disappointed and wondering about refunds, credits, or vouchers for plane tickets, cruise bookings, tours, and more. Even if your scheduled travel is months away, you might be weighing your options. And many travel service providers seem to be working to address concerns about upcoming trips. 

That trip you planned for summer…

Start by reviewing the travel provider’s refund policies and the terms of your reservation to see your options. In addition, many companies are posting information on their websites about COVID-19 travel-related questions. Many are offering refunds or rebooking options in light of the situation. Of course, check to see if you purchased travel insurance and what it covers. Some travel insurance policies may refund your cancelled trip.

Here’s what we know right now:

Airlines: According to the U.S. Department of Transportation, airlines must offer refunds, including the ticket price and any optional fee charged for cancelled or significantly delayed flights, even when flight disruptions are outside their control. If your airline isn’t doing that, you can report it to the U.S. Department of Transportation.

Cruise Lines: If you booked a cruise, your options will vary by cruise line. Your ticket contract lays out cancellation policies and your rights. For example, you may be offered a refund, or a credit or voucher for a future cruise. If you opt for a credit or voucher, make sure the expiration date is far enough out that you can use it. Read more from the Federal Maritime Commission about your rights and the recourse that might be available to you.

Trains: Amtrak is waiving change fees for reservations made before May 31, 2020; you can make changes online at Amtrak.com. For cancellations and refunds, call 1-800-USA-RAIL.

Lodging: Some hotel chains may be loosening their cancellation policies, waiving change and cancellation fees that would normally apply to non-refundable rates. Check with the hotel for your options.

As with many purchases, your best option is usually to directly contact the company you booked with to see if you can resolve a problem. So, whether you booked directly with an airline or hotel, or you used a travel site or consolidator, start with them. Then, to report a travel-related problem, contact your State Attorney General’s office or tell the FTC at ftc.gov/complaint.

To learn more about consumer issues resulting from the Coronavirus pandemic, sign up for the FTC’s consumer alerts at ftc.gov/subscribe.

Recent Posts

  • Economy Opening… Stop… Start…
  • Road Map to Opening
  • Tried Calling?
  • Free Credit Reports
  • CA License Extensions for Cannabis Business
  • What Are Libraries Doing Now
  • Cannabis Markup to Remain the 80%
  • Time to Retire?

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