Not the diabolical Microsoft...DOH!

Sentient species taste better...

Why is everyone assuming that it is Stardock who will be acquired? Why isn't it possible that they will be doing the acquiring? I wouldn't classify Microsoft as a "similar" software firm to Stardock. They might compete in the same markets, but Microsoft competes in almost every market.

I'd say that it's also about applying some pressure to the tax negotiations (what a word!). And my guess would be that there's a number of smaller companies in the immediate vicinity of said software giant.

This is why seminars are good for you. Reading something and then discussing it with folks who also read it recently helps you notice where you are not reading as well as you might like.

These days I earn all my income 1099, and I used to do scholarship and teach civics; I should have been sharper. But I blazed through that article in normal-lazy mode and did not notice that it implied (without giving enough facts, IMO) that the new MBT might do something like make a business pay employment tax for an FTE hired as a contractor. It might just be partial; there's just not enough info there and I've done no research.

I wish that article had included something like "Portion X of the new taxes is because Stardock has 55 full-time contractors working onsite and Portion Y is because Michigan coporate income taxes have changed."

Reading over it two things stand out in my mind one is the previously mentioned employee increase. The other is that is now looking at a percentage of the profits. .5% of 18,000,000 is 90,000. 84,000 is based on the fiscal year ending June 30. 168,000 is an estimate for 2008. Yes that is a 14,000% increase. But information I don't have is was the defunct SBT a flat tax that applied to all business in the state? How does the new MBT stack up against tax rates in other states. From the quote below I'll make an assumption that it is at least in part, out of line. As from my reading the forums Brad seems to be a fair minded man with a good head for business. I wish Stardock all the best working this out. But for me at least I feel very under informed from that article, and it leaves me with too many questions to form an opinion. I also can't get to MS from a mention of Redmond, WA in the article. So I wouldn't even venture to guess that Stardock is being purchased.

I usually don't get so involved with a post, and if I step over a line here Mods, Stardock - Feel free to delete this post. I just got curious because of the 14,000% That's just wild!!!.

Here is the state info on the tax The MBT
A Better Tax for Michigan Business
- Rewards investment in capital, jobs, and R&D
- Reduces reliance on taxing compensation
- Provides small business and personal property tax relief

The Tax
- Business income taxed at a rate of 4.95%
- Modified gross receipts tax (sales minus purchases from other firms) at a rate of 0.8%
- Banks pay alternate net capital tax (net worth at a rate of 0.235%)
- Insurance tax rate increased from 1.07% to 1.25% (current credits retained)

Credits for Investing in Michigan
- Investment tax credit for purchase of capital assets
- Compensation credit for jobs created or retained
- Research and development credit

* The MBT retains or expands 15 Single Business Tax (SBT) credits and adds 11 new credits.

Here is a real mouthful about the SBT
Elimination of the Single Business Tax (SBT)
Public Act 115 of 1999 provided for reduction of the Single Business Tax (SBT) rate by one-tenth of a percentage point per year from its 1998 rate of 2.3% until the tax is eliminated. This process has been accelerated through the initiative process. On August 9, 2006, the Michigan Legislature approved voter-initiated legislation (Public Act 325 of 2006) to repeal the SBT effective for tax years beginning after December 31, 2007. Legislative approval of legislation is not subject to veto by the Governor, unlike conventional bills introduced by legislators and approved by both houses of the Legislature. The revenue effect of the repeal of the SBT will be approximately $1.9 billion on a full-year basis and fall entirely on the General Fund of the state, with some of the loss affecting FY2008 and the remainder FY2009. The initiated law contains language that encourages the legislature to: "adopt a tax that is less burdensome and less costly to employers, more equitable, and more conducive to job creation and investment."
Hard to believe that sentence I bolded at the end. LOL

I now have enough info to form an opinion. Go get them Stardock. Hope they work with you and you don't have to move. At least if you do though the NW is a nice place and it puts you just south of Ironclad   

lol

I think a little bit of pee came out......

Yeah...no it's not, and that is not the point. The point is that under this new tax code, Stardock's corporate tax has gone up 14,000% in one year. How about if your property taxes went up 14,000% in one year? Would that be a drop in the bucket? While $168k may not seem like much against $20M in revenues, Stardock is still classified as a small company, and that is a huge expense to have to overcome. My (uneducated and conservative) estimation is that this equates to Stardock being forced to sell at least 16,000 MORE games than they did the year before, just to make up the difference. Or, they could eliminate 2 jobs. The point is, what do you suppose the hit would be to a company with $100M in revenues and 120 employees? Companies make their budgets based on the previous year's data, adjusting for growth. They did not budget for a huge increase in taxes like this, and it is a lot to have to absorb. It could mean that there would be no annual bonus for the employees. It could represent a lot of things, and it seems that this law penalizes companies like Stardock for problems that don't even relate to their activities.

It sucks, but what are you going to do? StarDock was dodging taxes by exploiting a loophole. It was legal, so I'm not saying that it was a bad thing. But the loophole was plugged. SD was happy playing the game when they were coming out winners, but now that the game changed, it's a little disingenuous to cry foul now.



Oh well. SD was playing over their head anyway, relying on paying fewer taxes due to a loophole. Next time, they'll learn to stop relying on loopholes for financial solvency.

Just, whatever happens, don't go over to Microsoft please. No matter what, you can't. It's Like EA trying to buy out the company that produces Grand Theft Auto. Don't do it.

For their game products, yeah, I would definitely a competitive area, but I think they have a pretty good monopoly on the windows customization market. I don't think the prices for their customization software is outrageous or anything though, but I assume they make a pretty good margin on that area of their product line (unless they're just doing major rewrites of the code base often).

That definitely varies by situation. About a decade ago, Microsoft lost a major lawsuit about how they used on-site contractors. IIRC, they had to let many go because they were unwilling to convert them to full-time salary positions.

I think the stock options stuff had something to do with it, but in any case, like most regulatory contexts, there is a wide range of stories, some pretty, some ugly, some just a muddle.



It took me a couple of years to get in the hang of planning for and paying my estimated 1099 taxes, and it is still my least favorite part of working 1099 because if I have a better year than I expected, I can end up owing a payment with my return.

As far as your taxes being taken from you, we need to get over this nonsense in the US. Either sign up for Libertarian fantasy-land and start getting all sorts of bills for police protection, fire protection, maintainence for the street where you live, tolls for your road to work, and, of course, your share of the privatized US military, or just admit that taxes are a necessary, if unpleasant, part of civilized life. We need to stop talking like there is no such thing as a bad tax cut and focus more on whether a given tax law is working well or doing screwy things like this MI change seems to have done.