My Internet Consulting Business Does Not Physically Have To Be Here

By Mike Maddaloni on Wednesday, May 20, 2009 at 02:49 PM with 10 comments

My Internet consulting business does not physically have to be here. In reality, it can be anywhere. Most of you reading this probably are saying, “duh” as you already know that. This message, however, is not clear to politicians who make laws concerning taxes and favorable business climates.

As I write this, I am sitting in the corporate headquarters of my business, Dunkirk Systems, LLC, a 5-year old Internet consulting firm. I founded the business shortly after moving to Chicago from Boston, as I decided to go on my own after then working on the Internet for almost a decade and in IT for over 15 years. As my business would be initially based in my home, the business was established in the city of Chicago, in Cook County in the state of Illinois. I live here, my business lives here.

But I don’t always work here. As my computer can travel with me, I have done work in cities like Minneapolis, Oshkosh, Helsinki and Copenhagen. I have done work at 30,000 feet over the Atlantic Ocean and in the basement of friend’s houses. All I need is an Internet connection and I can connect to my clients and provide the Web site strategy, design and development services they pay me for.

It is one thing I can work from anywhere, but my clients can be anywhere as well. Most of my clients are outside of Chicago. This is not specifically by design, though, as my business has mostly grown by referrals from existing clients. As well, some of my clients have relocated to other states. Even for the clients I have in the Windy City, I typically work with them by email and phone. Don’t get me wrong, I am a very social person and prefer to personally work with my clients. I don’t always have to, which is the beauty of it.

I bring this up as there is talk in the Illinois legislature about imposing taxes on software and Internet services. Though no particular bills have been presented as I write this, apparently legislators are trying to see what they can “get away with” as far as a bill, one that would pass rather than be defeated.

As much as I strive for The Hot Iron to not get into the abyss of politics, it is almost impossible today. It goes without saying that such laws to add taxes on the services Dunkirk Systems, LLC and other similar firms in Illinois provide would have a huge negative impact on my business, not to mention on clients. There is the administrative impact on my business for calculating, collecting and paying such taxes. I have all that I need to do for employment taxes! Then there’s the additional line item on client invoices. When people and businesses are doing all they can to pay their bills, here comes more to pay.

Will my clients simply accept a tax without a peep? Hardly! Who knows what the tax rate would be, but I am sure some will start to look around for other providers in other states whose rate – including tax rate – is lower. As I try to competitively bid on projects, the fact I will be charging a certain percentage for tax will be a bad mark on my proposals. Not to mention the higher cost I myself will have for technical services I get from other individuals and firms. This, on top of the myriad of high taxes and fees including the highest sales tax in the United States at 10.25%, put me in a huge disadvantage against other capable consulting firms around the country and the world.

So what will I do? This blog post is my first step, as I plan on also forwarding it to my state legislators. However knowing the political climate in Illinois, I hardly believe it will make a difference. Beyond that, I can only react in the short-term as to any passed tax laws. In the long-term, though, if it does have a true negative impact, I may be forced to move Dunkirk Systems, LLC from Illinois, which would more than likely mean I would be leaving as well. My business moves, I move.

Taxing our way out of the current business environment will not work. Tough cuts and imaginative thinking are needed to recover to the greatness we are capable of. I will continue to do my part, though it may have to be from someplace else.

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