“Its” Mystery Is Solved

 

I get this question probably once a year: What does I T S mean under my signature on the contract?

They are looking at the signature block at the end of an agreement and see this:

SELLER:

By:_______________________________________

Name: ___________________________________

Its:_______________________________________

Yeah, right there. I T S, otherwise, better known as “its,” the possessive form of “it.”  The blank is for the person signing the contract to write in his or her title to show why they have authority to bind the company to the contract.  So it might be its president, its managing member, or its chief marketing officer.

The reason for the title to be there is to confirm that the person signing CAN actually sign and obligate the company to act in accordance.  If the person signing is the slushie-machine filler, they probably don’t have the authority to make a decision about a commercial during the Super Bowl.  It’s a way to make sure the contract is binding.  The reason it says “Its” instead of “Title” is a choice of the drafter.  It doesn’t have to be “Its,” and most people don’t even notice or ask about it.

However, those who do notice, are puzzled, and ask are the best clients.  They are the ones actually reading and thinking about the contract.  They want to understand what is going on, and by asking, they are sending the signal that they care.  Once I explain the “its,” I usually get an embarrassed, “Oh, jeez! That was a stupid question. I should have known” in response.  But I always assure them that it wasn’t stupid to ask and to ask more questions.  Nothing is worse than not understanding what you are signing.  It is never a stupid question if it helps you understand your contract.

That means if you have a question, ASK!  I promise it won’t be the silliest one that I have heard.  I would rather you ask and know the answer, than you sit and wonder what something means.  Trust me, we will look much more stupid if the question comes up in litigation due to a misunderstanding than it does before everything is signed.

South Dakota v. Wayfair, Inc.: Taxation in the Digital Age

Remember the days of the tax free Internet purchase?  Me neither, because those days never really existed.  That said, in the wake of the recent U.S. Supreme Court decision in South Dakota v. Wayfair, Inc,  the risk of non-collection for said taxes has shifted from consumer to company – and anyone who makes an online sale should sit up and take notice.

A Few Things Before We Get Started

As with most of my posts, I like to set a few baselines before we dive in:

1) Use Tax: The reason the tax free Internet purchase never really existed.

Use Tax is the tax you’re supposed to pay (and remit yourself!) on purchases from out-of-state retailers.  That’s right! You’re supposed to keep track of your out-of-state purchases, note if that business collected Wisconsin sales tax with your purchase, and if not, remit the appropriate tax yourself! Don’t believe me?  Here’s the link to the Department of Revenue FAQ.

2) Quill is Dead: If you’re an online retailer I’m sure you’ve heard this old adage: “I don’t have a location in Wisconsin, and I don’t even have any storage facilities there, so I don’t need to collect sales tax!”  If you’d made that statement a few months ago, you might have been right (or mostly right), but not anymore.

The Good Ol’ Days

In the days pre-Wayfair, the risk of non-collection for out of state sales tax rested with the consumer.  If I made an online purchase at NewEgg.com for $5,000.00 and didn’t report that purchase on my state tax return, I was at risk for underpayment, audit, penalties, etc. – but not NewEgg.

The reasoning was: If NewEgg didn’t have a “substantial nexus” (a.k.a. some type of operation) in Wisconsin, the State, via the Department of Revenue, couldn’t compel NewEgg to collect and remit the tax appropriately.  Quill Corp. v. North Dakota.  The basis for that reasoning – the Commerce Clause of the U.S. Constitution – and the previous difficulty companies had calculating and remitting taxes to all 50 states (and myriad municipalities).

The Problem

The problem for State governments: Most people didn’t pay Use Tax, budgets are tight, and in the age of the online purchase, a big piece of taxable pie is missing.

The Wayfair Decision and What it Means

This has been a long time coming and did not happen by chance.  Many State legislatures passed new laws compelling “out of state” retailers to collect tax – purposely trying to force the U.S. Supreme Court to revisit its decision in Quill. and eventually, the Supreme Court did.

What does that mean for you?

1) Don’t freak out!  Implementation of the new rules won’t go into effect in Wisconsin until October 1, 2018.  It’s not a huge amount of time, but it’s not tomorrow either.  You have time to craft a solution!

2) Visit the DOR website here for more information.

3) A “small-seller” exemption applies! Because what rule would be complete without an exception! If your business makes only $100,000 of sales in Wisconsin; or only has 199 total transactions with Wisconsin consumers, you don’t need to worry! Does the exception apply to you?

4) Regardless of whether or not the exception applies, it’s time to fortify your business for the future, and more taxation is inevitable.  Schedule a meeting with your accountant, investigate software platforms that make it easy to remit tax to various states, and schedule an appointment with your favorite attorney to discuss in more detail.  Your situation will be unique!

If you need help, OGS is here to assist you!

*Note to the legal nerds: Of course, the Quill decision is much more nuanced than I’ve detailed here.  If you want to talk nerdy about it – I’d love to – just not in this blog post!

Learning to Read the Harmonized Tariff Schedule

I’ve written about this before on LinkedIn – full disclosure, but over the past few weeks, I’ve gotten multiple questions about customs costs, and how they are assessed, from clients who are importing products from abroad and re-selling them in the United States.  Each client’s situation is unique, but a critical step one in all situations is learning to read the Harmonized Tariff Schedule – the massive index that assigns almost every conceivable product a duty rate.

A little background before we get started:

First, the United States does not levy a huge amount of tariffs on a lot (but not all!) of overseas goods.  That said, tariffs are political tools – so you will often see a 0 % import duty levied on products from countries like Germany (or the many other counties the US has a free trade agreement with) but a 40% duty on the same product from Cuba.  Therefore, choosing where to import a certain product is an important consideration.

Second, it’s easier than ever to import.  Go to Alibaba.com and click “order.”  But, with increased ease comes increased risk because the law still imposes all the same requirements on you, the individual importing widgets from China, as it does a Fortune 500 with millions of imports each year.

The Harmonized Tariff Schedule

The first step to figuring out “what” and “from where” to import comes by learning how to read the Harmonized Tariff Schedule.  The HTS is a HUGE catalog that categorizes imports by number and then assigns their respective duty rates.  Back in the day, the HTS was available in print, and it took a while to search, but now it’s an online searchable database here.

When looking at the HTS, you’ll see 2 columns after the “description” column; these are the the particular ones we will be discussing today.

The “Unit of Quantity” column tells you how imports on that particular product are assessed.  For example, vinyl flooring is assessed by meters squared – while commodity goods are often assessed by kilogram.  Therefore, in the case of vinyl flooring (HTS Code 3918.10.20) – you will get charged a 5.3% duty on the invoice value of each square meter imported.

The “Rate of Duty” column is next and is broken down into 3 parts.  The first part, “Column 1,” tells you the “general duty” rate, which – in layman’s terms means – “the general duty the US charges other countries we get along with but don’t have a free trade agreement with.”  For legal nerds, this is really called “Most Favored Nation” treatment or a country with which the US has “Normal Trade Relations” and is a cornerstone concept of the World Trade Organization.

The second part is the “Special” duty rate which the US charges countries with which it has a special free trade agreement.  There are a lot of free trade agreements out there, so be sure to check if your country of origin applies – because most “free” trade agreements set the duty rate at 0!

The third part is the “Column 2” or the “bad boy” duty rate that the US charges on imports from countries which we do not have normal trade relations with.  The most recent example of a country moving from Column 2 to the MFN column is Vietnam.  The only countries remaining on the list are North Korea and Cuba.

As you have probably noticed, this post assumes you have already figured out which HTS code applies to the product you are importing, but that is often the hardest (and most legally significant) part of the process.  If you’re interested in reading more on that point, check out the case of “mutants” or “humans” –  Marvel won in 2003!

If you need help expanding internationally or taking a look at your current import process, OGS can help!

That Which We Call A Rose

That which we call a rose
By any other word would smell as sweet

Juliet argued that it didn’t matter what Romeo’s name was for she would love him anyway.  And, by the way, if he wasn’t Romeo, they could be married.  But as we know, that’s not what happened.  Let’s just say, it went downhill for them.

But what about names in contracts?  How important is it to get Romeo Montegue’s name right? Would the deal smell so sweet if he signed it under a pseudonym?  Well, (here it comes!) it depends.

Contracts are promises between parties to act.  You need to be able to identify who promised what, and if they fail to follow through on their promise, be able to enforce the action.   Therefore, the better the identification, the better the ability to get the correct party to act in accordance with the contract.  After all, you don’t want a valid defense to be one sung by Shaggy (It wasn’t me!).

For businesses, that means knowing the company’s name, entity designation and often the address and state of incorporation.  For example, Simple Soaps for Simple Folks, LLC, a Minnesota limited liability corporation located at 1121 Co Rd 10 NE, Dover, MN 55929.  I now know what the official name is, where to find it, and if it moves (or changes name) where to look for its new information – Minnesota’s Business Search.

If there is a trade name involved, you can note that simply by saying the company does business by that name:  Alphabet Inc. d/b/a Google.

For people, it is pretty similar.  We want their name, state of residence, and an address.  For example, Mr. Bruce Wayne, a New Jersey resident, living at  1007 Mountain Drive, Gotham City, New Jersey.

Mr. Wayne, however, may be better known by an alias.  Often, you simply note that much like the trade name:  Mr. Bruce Wayne a/k/a Batman.  Or if it is a nickname, we might put it this way: Katherine (Kate) Mulgrew.  Still easy to recognize who really is held to the promises.

Every once in a while, a person wants to only disclose the pseudonym.  Fears of FOIA may prevent Mr. Wayne from disclosing his name in his contract with Gotham PD.  As we have learned, some people stick by pseudonyms.  It doesn’t prevent them from being held to the contract; it just can make it harder to be sure that you are chasing after the correct party.  Some parties are pretty well known.  J.K. Rowling likely doesn’t need Joanne spelled out.  However, having the actual name makes the Shaggy defense much harder.

Therefore, if you are confident that you can identify who each party is and can use it to enforce a contract against that party, then it works.  The easiest way to do so is to identify the party with details.  And, good luck getting “It Wasn’t Me” out of your head.

Liability Waivers in Your Adventure Business

Adventures are everywhere and more accessible than ever! But, with more adventure comes more risk for the participant and more risk for the business (and its owners).  As you can imagine, the question\request I get most often from adventure business owners is related to liability waivers and protecting the business from legal risk in the case of an accident (because accidents do happen!) This article discusses the reality of liability waivers in Wisconsin and some critical points every adventure business owner should think about while developing the critical culture of safety that is required to protect their business and investment!

The Liability Waiver and the Law in Wisconsin

First, a little background:

Reality Check 1: A business with a great waiver, but bad (or no) business & safety practices to back that waiver up, is absolutely still open to legal risk – the waiver won’t save them. Don’t believe me, Just ask Tough Mudder.

Reality Check 2: The Wisconsin Supreme Court has never upheld a liability waiver when it has been challenged by an injured person.  That doesn’t mean that no waiver will work – just that Wisconsin is strict when it comes to what the waiver must contain to be enforceable against a regular customer.

A Release of Liability and Agreement Not to Sue (The Waiver) 

A good, well drafted, well organized, and easy to understand waiver is a key component of minimizing risk. The waiver should be:  1) tailored to your business; 2) part of your regular business process; and 3) in plain English.

Additionally, the waiver should not attempt to avoid all types of liability (willful or reckless conduct) because that will be grounds for invalidating the waiver all together in Wisconsin.

Finally, the waiver should: 1) offer the participant the chance to bargain its terms; 2) be in its own document; and 3) detail the risks of participation explicitly.

(and this is just a short list…)

 Reinforcing the Waiver With A Culture of Safety 

More important than the waiver, though, are all the things the business does to back the waiver up and reinforce that safety is a key component of the business model. Here are a few things to think about:

1) How does the waiver look? Can anyone besides an an attorney understand it? If you don’t understand your own waiver – it’s time to update it. Legalese is a dying language, and the waiver (and any agreement for that matter) will be better if it’s written in plain language – so anyone can understand it with relative ease.

2) How is the waiver presented to customers? Are they allowed to ask questions? (Especially if the waiver is filled out online or at home). You should not provide legal advice on particular parts of the waiver – but you shouldn’t have a policy of NOT answering any questions at all either (which is the case at a lot of places).

3) Do customers have a comfortable space to sit down and read, understand, and sign the waiver? This might seem trite, but it’s not. Can you reasonably expect anyone to understand the waiver if it’s crumpled up on their knee and they are squeezed into a couch in the corner? I wouldn’t want to sign a document under those circumstances.

4) Is the participant’s identity checked when they arrive? How does the business ensure everyone has signed a waiver? Again, seems stupid – but it’s an easy step to take.

5) What other safety training is in place? After the customer signs the waiver,  are they given further instruction on how to be safe? In skydiving and zip lining, there are brief classes or additional videos that the customers watch. Further, training for the customer and opportunities to ask questions are key.

6) If the activity is inherently dangerous (like Tough Mudder) – what safety protocols are in place? Accidents will happen, but what if something really bad happens?  How will it be handled? How are staff trained to respond?

7) What about angry customers – how does the business deal with them? Again, seems unrelated – but it’s not. An angry customer with a lot of money can file a lawsuit pretty easily – what steps are in place to deal with problem customers?

A waiver is an absolute “must have” for any adventure business, but a waiver by itself is useless without the culture of safety to back it up.  Now is the time to review your waiver for compliance with Wisconsin law and to think critically about where the waiver fits into the larger safety and risk reduction strategy in your business.  If you need assistance, OGS can help!

Don’t Cross the Streams

When talking with people starting businesses, one question that we get is a lot is “How do I limit my liability?”.  First, we talk about creating a business entity.  And don’t forget about insurance.  But, one thing we always talk about is “Don’t cross the streams. It would be bad.

By that, we mean keep your business money and your personal money separate.  That means separate bank accounts and separate books.  It definitely means pay your business debts using your business account and your personal debts from your personal account.

If you have two businesses, pay each one separately.  If you are going to give money to one from another, it has to be a loan – yes, with interest.  These are separate legal entities.  You wouldn’t loan your neighbor’s business money without interest, which means you shouldn’t do so between your own.

The more you treat the entities as distinct from you and each other, the more likely courts will follow your lead and do the same.  So, unless you are faced with a giant, flaming marshmallow man and a gateway to Gozer, don’t cross the streams.

Rent Never Abates to Zero – and Other Tips for Tenants!

Last time I wrote about tips for Landlords embarking on their first adventure into residential renting – but today, I’m going to concentrate on a few tips for tenants.  In Wisconsin, there are plenty of “gotchas” or “trap doors” in the law for both parties – but when\if mistakes happen, the outcomes often disproportionately impact tenants.  Therefore, if you’re about to rent a new place for summer, keep these tips in mind!

Get a Check-In Sheet (and Take Pictures!)

I mentioned this in my last post, but a Check-In sheet is even more important for Tenants.  A Check-In sheet allows you to mark pre-existing damage to the property so you won’t be held accountable for it when you move out!  Although a Landlord is required to provide a Check-In sheet to you when you move in, many do not.  Therefore, you should take it upon yourself to note the damage and take pictures too.  Within 10 days of moving in (the usual deadline), you should provide your Check-In sheet and pictures to the Landlord.  Also, make sure to keep copies of everything – so if you have to prove what was damaged before, it will be a piece of cake!

New Money Goes to Old Debt First

This is important to remember:  If you owe money to a landlord for back rent, “new money” you pay the landlord will be applied to the oldest debt first – not the amount currently due for this month.  

For example, if you owe $500 in back rent, and rent for June 1st is $500 – you will technically have to pay $1000 by June 1 to avoid eviction.  If you pay only $500 (the monthly rent) it will be applied to the back rent due, and you will still owe for June 1.  Many tenants incorrectly think that they can pay for the “current” month and take extra time to catch up on the “back rent” – but that is not the case because “new money” is always applied to the oldest debt first.

Rent Never Abates to Zero!

Imagine this scenario: you have a hole in your roof and have asked the Landlord to fix it 10 times to no avail; you’re at your wits end.  In a last ditch attempt to get the Landlord’s attention, you withhold rent and say “I’m not going to pay you one more dollar until you fix my roof!”  Not a good idea – you just got evicted!

If you are deprived of the normal use of your rented home, you are not liable for full payment of the rent.  The thought being, you should only pay “full” rent when you have the “full” use of your home.  But, if you stay in the home (even with a hole in the roof) rent will never be $0; the thought there being, even with the hole in the roof – you’re still using some of the home and therefore should pay some of the rent  Wis. Stat. Sec. 704.07(4).  This is a mistake a ton of tenants make and if you simply pay no rent then there is basically no defense that you can make against the eviction.  So, what should you do if a Landlord repeatedly fails to make requested repairs?

1) Always make sure your requests for repair are in writing and delivered to the landlord in accordance with your lease.  Phone calls and visits to the leasing office to request repairs won’t cut it – you need to make sure your requests are in writing so you can prove you made the requests later.

2) Keep a list noting the dates\times you made each repair request.

3) If the Landlord fails to make the repairs after repeated written requests to do so, then you should write a letter with your next rent payment stating that rent will be abated by some amount (less than $0!) the following month and until the repairs are made.

*Please Note* This is NOT the procedure to follow for minor repairs (rent only abates if the problem is serious!) and should be used with caution no matter what.   You will have to defend the amount of rent you withheld, so make sure it is reasonable (and if you live in a city like Madison that has adopted an – ordinance regarding rent abatement – make sure to check it out before you do anything!)

If you have questions, OGS is glad to help!

It All Comes Around

We started on this fair use train to answer a question someone asked me:  When can you use music in videos and podcasts?  I think you can make some guesses as to the answer.  First, you can certainly use music if you get permission from the owner of the music.  Second, there are companies that provide a license for a catalog of songs for videos.  Third, there are songs that are open source or under the Creative Commons license.  Fourth, if the songs are old, they are in the public domain and no longer protected by copyright.  Therefore, go ahead and use that Mozart Piano Sonata.

But, can you just turn on the radio and hope for a good song?  Unless you are doing WPR’s morning classics, that is probably a bad bet.  As we have learned, it is not likely fair use – especially if you are purposefully putting the music in your video and podcast.

Now, what if you are shooting a scene and someone – out of your control – is playing music in the background?  If that use is truly incidental, you have a fighting chance to say it is fair use if you do not focus on the music.  Extra bonus points if it plays for a short period and it’s in the background.  But again, that gets you a defense, not a free pass.  Therefore, think carefully before choosing your mood music and how it is supplied.

Tips for New Residential Landlords in Wisconsin

Becoming a landlord sounds like a great plan – you have a nice house you can rent out, the monthly rent payments will cover your mortgage, and you will be free to buy a new house, retire early, or all of the above!

But, as with many things, it probably won’t work out quite as you planned – Tenants sometimes destroy property, pay late, crank up the heat, and leave without paying their utility bills. Before you take the plunge into the residential landlord business, here are a few very important things to keep in mind! Landlording can be great – but only if you enter the fray with your eyes wide open!

Tip #1: You Need a Lease that Complies with Wisconsin Law – This is the most important step you can take to protect your interests as a landlord.  Not having a lease will cause issues for a number of reasons, specifically: 1) your agreement will be in your minds only – and hard to remember as the tenancy goes on and; 2) if there is an issue, it will be a “he said\she said” type of scenario, and the onus will be on youthe landlord, to prove non-compliance with the (nonexistent) lease (a hard proposition when there is no document to show the Court).

Having a lease is important – but having one that is legal under Wisconsin Law is even more important. Specifically, 1) your lease cannot deduct from the security deposit for disallowed damage like carpet cleaning; 2) your lease should advise the tenant what will be done with their property if they are evicted (will you store it or throw it away?); and 3) your lease should specifically state when the Landlord can enter the property, and who will be responsible for paying for each individual utility. This is just a short list of what your Lease should cover, so you should use a trusted Wisconsin Lease or speak to an attorney to have one drafted for your specific circumstances.

Tip #2: You Need to Provide Additional Documentation To Tenants When They Move In  – In addition to a written lease, you must always provide residential tenants with: 1) A Check-In Sheet where they can mark any pre-existing damage to your property; 2) A smoke detector notice certifying that smoke detectors are installed and working; 3) a carbon-monoxide notice certifying that CO detectors are installed and working; 4) A Lead Based Paint Notice if your home is older; and 5) Information on how to access the Sex Offender Registry. Failure to do so prior to the start of the tenancy will result in mandatory fines and penalties to the Landlord.

Tip #3 – Take A Security Deposit and Don’t Use it as Rent – Make sure you get a Security Deposit – this is your best way of protecting your property against damages. A Security Deposit cannot be wildly large, but is usually equal to 1 to 2 months rent. It should be collected from the Tenant prior to move in, and it should NEVER be used as rent. If you allow a Tenant to use the security deposit as rent, your insurance against damage will be gone (often before the you get a chance to inspect the property) and, more importantly, you could open yourself up to fines and possible lawsuits for mis-using a Tenant’s security deposit and\or not providing an accurate itemization of the amounts withheld 21 days after termination of the tenancy.

These are just a few things to keep in mind when becoming a residential landlord. If you have any additional questions, or want more information, please feel free to reach out OG +S!