Whether you manufacture pallets, you pivoted from your core product to produce PPE, or maybe you are a retailer who is looking for some great insight from industry experts or you have accounting or finance questions related to your construction business or any manner of business in between, we would be glad to have you join us. The topics we will cover are not only relevant and timely, but they are also sure to reveal growth opportunities in your business. This special presentation features insight into the PPP Loan and Paycheck Protection Program Loan Forgiveness process, CARES Act implication, R&D opportunities, Human Resources compliance risks, and insight from leading professionals in the manufacturing and professional services space. Specifically, we will discuss: - Where we stand now and the future of manufacturing - Risks in Manufacturing - Cybersecurity Concerns and Issues - State and Local Tax Risks - HR Policies For Your Organization This informative event will be hosted and moderated by Dustin Raber, director of manufacturing and distributions services at Rea & Associates.

5. Agenda: Current Issues in Manufacturing
• What we’re seeing
• Paycheck Protection Program update
• Tax Opportunities & Issues
• Things to do right now
• Questions

6. What We’re Seeing
• In general, business appears to be good
 Many manufacturers deemed essential
 Highly dependent on who your customers are
• Supply Chain issues
 Overseas sourcing
 Supplier Risk Assessments
• Workforce issues
 Unemployment impact
 Labor shortages
 Migration toward a higher degree of Automation and Industry 4.0
 “Workforce of the future”

7. Paycheck Protection Program Update
• Will there be a round 2?
• Forgiveness update
• Tax implications of forgiveness
 Non-taxable but expenses non-deductible
 Consider status as of 12/31/20
 Consider cash position & future needs
• What will the tax bill be on the loan proceeds?
• Action steps:
 Contact your banker to review your options and where things stand
 Develop a timeline to know key dates

8. Tax Opportunities & Issues
• Cash flow provisions from CARES Act
 NOL carrybacks
• R&D opportunities for those who pivoted
• PPP treatment
 Is there an opportunity to defer?
• Do you know what to ask your CPA?
• Don’t forget “normal” tax planning activities!

9. Things To Do Right Now
• Consider overall cash position
 Inventory
 AR/Bad Debt
 Capital Investment
 Tax
• Monitor sales forecasts
 Through 2021 Q1 & Q2
• Review Margins & Costs
• Are you ready for a second wave?

13. General Agenda
• COVID Phase 1 and Phase 2 Government Responses.
 How have company tax functions been impacted?
• Economic Nexus – an area of continuing concern
• Detailed Discussions
 Manufacturing Exemption – opportunity and pitfall
 Ohio Use Tax Audits and Manufacturers

14. COVID Impacts
• Phase 1 government responses are underway or
completed
 PPP
 Stimulus checks
 Enhanced unemployment
 Delays to many filings and payments
 State level holds on controversy work
 Prioritization of refund request reviews

15. COVID Impacts
• Phase 2 government responses on the horizon
 Due to proximity of the election, uncertain if second wave of
federal stimulus behavior will occur before January.
 Phase 2 is mainly revenue raising in nature
 New Tax types – gross receipts?
 Increased discovery, targeting out of state non-compliance
 Removal of discretionary penalty relief
 Increased use of “database” discovery (1099s, other state
data).
 Reduction in planned spending for important but non
essential projects

16. Image Credit: 2020 Bloomberg Tax and Accounting Survey

17. Image Credit: 2020 Bloomberg Tax and Accounting Survey

18. Image Credit: 2020 Bloomberg Tax and Accounting Survey

19. SD wins SD v. Wayfair
• U.S. Supreme Court overruled old cases:
 Quill v N.D.
 National Bellas Hess v. Dept of Revenue of IL
• Held for South Dakota, upholding their economic sales tax
nexus standard.
• Substantial Virtual Nexus
 $100,000 or 200 transactions in a state annually
• States have run wild implementing many different versions of
this. Almost every states with a sales tax has adopted
economic nexus.

20. Manufacturer Impact
• Sales of your products to others
 Exemption certificates
 Taxability
 Nexus and Reporting
• Income Tax evolving into gross receipts tax
• Your purchases from out of state vendors
 Have these been reviewed for whether tax needs to be paid
on these?
 What are we seeing on vendor audits?

21. Example
• Non-Ohio vendor has sold you lots of stuff. They haven’t
charged you tax.
• YOU owe the tax. Maybe you paid it maybe you didn’t.
• They ask you for the tax. What will you do?
 Pay it
 Refuse to pay it (they may disclose you to the state)
 Pay it again (they don’t accept your use tax filing as proof)
 Give an exemption certificate (does that apply to you?)

22. Case Study: Manufacturers & New Facility Builds
• A large manufacturer hired a general contractor to build
a new manufacturing facility in Ohio.
• General contractor provided some asphalt & concrete
construction contract services directly to manufacturing
customer.
• Additional subcontractors were hired by General
Contractor to supply other services like electrical,
plumbing, framing, drywall, roofing, flooring, and HVAC.
• Additional vendors used by General Contractor included
suppliers of furniture, signage, and manufacturing
equipment, and installers of manufacturing equipment.

23. Case Study: Manufacturers & New Facility Builds
(cont.)
• We assisted the Manufacturer by providing the following services:
 Reviewed the invoices the manufacturer received from the General
Contractor and blueprints of the new manufacturing facility to determine
where the manufacturing process began and ended and what
purchases fell into that process.
 Provided the manufacturer and General Contractor with determinations
of which items on the invoices and in the blueprints were exempt from
sales tax and which were taxable.
 Completed a manufacturing exemption certificate on behalf of the
manufacturer to provide to General Contractor for the GC’s purchases
of manufacturing equipment & manufacturing equipment install services
from their vendors and subcontractors.
 Provided General Contractor with completed resale certificate to give to
their vendors for manufacturing equipment and business fixture
purchases.

24. Case Study: Manufacturers & New Facility Builds –
End Results
• We helped the manufacturer save around $100,000 in
sales tax on the charges from the General Contractor.
• Both the manufacturer and General Contractor now have
some guidance on when to pay sales tax and when not
to pay sales tax so both companies can lower costs in
the future.

25. Case Study: Manufacturers Under Use Tax Audits in
Ohio
• Ohio-based manufacturer was audited for use tax in
Ohio.
• The lookback period was 74 months (i.e. 6 years, 2
months)
• The manufacturer never had a use tax account in Ohio,
which was why their audit lookback period was longer
than the usual 3 year (or 36 month) lookback period.
• The manufacturer generally relied on their vendors to
make taxability determinations for them, and the
manufacturer lacked internal controls to check if the
vendors were correctly collecting sales tax from them or
properly exempting the manufacturer’s purchases.

26. Case Study: Manufacturers Under Use Tax Audits in
Ohio (cont.)
• We defended the manufacturer by providing the following support and services
during the audit:
 Initial discussions with the auditor to discuss timing of the audit and layout a step-by-
step plan of when and how documentation would be provided.
 Reviewed the manufacturer’s Chart of Accounts & Trial Balance reports for potentially
problematic accounts to determine if account name changes were needed.
 Worked with the auditor to get a block sample period with statistical sample of that
period selected for invoice review. (Reduced number of invoices the manufacturer
needed to pull for the audit review to conserve their internal resources to focus on
other important business operation tasks and duties).
• Obtained a waiver of the audit’s statutory deadline to buy more time for work on the audit.
 Provided the manufacturer with our staffing resources to have us on-site to pull
invoices.
 Reviewed invoices and provided the auditor with taxability determinations to argue
statutory and administrative exemptions to reduce potential use tax liability.

27. Case Study: Manufacturers Under Use Tax Audits in
Ohio - End Results
• The preliminary results of the audit were $1.5M+ of use
tax due, and we assisted with reducing it by 80% for a
final result of $294,000 for a 6 year and 2 month
lookback period.
• Total audit defense accounting fees were about $69,000;
with a $1.2M+ in savings of use tax, we also saved them
more than 17 times our fees on this audit.

28. Case Study: Manufacturers Under Use Tax Audits in
Ohio (cont.) – Going Forward
• At the conclusion of the audit, the manufacturer asked us what they needed to
do about the open period for use tax reporting that wasn’t included in the audit
lookback period.
• We are currently assisting them with calculating use tax for current months by
reviewing their chart of accounts, trial balance reports, purchase listed (via their
detail general ledger report), and vendor invoices in order to make taxability
determinations.
• We will calculate use tax due for each month after the audit lookback period and
file Ohio use tax returns accordingly. Likewise, we will provide the manufacturer
with supporting documentation to defend under any potential audits in the
future.
• The manufacturer will also know which purchases to pay use tax on in the
future, and we will assist them with contacting vendors who need to collect sales
tax from the manufacturer going forward.
• Finally, we will look for use tax refund opportunities where the manufacturer may
have overpaid sales tax to their vendors so we can try to offset some of the
liability from their use tax audit and the use tax filings for the open period.

29. Rea Projects
• Exemption Certificate Campaigns
• Nexus and Risk Assessments
• Corrective Filings
• Internal Control Consulting
• Software Selection and Integration
• Audit Defense
• Construction Contractor Review/Consulting
• Reverse Tax Audits

33. • What are we doing for our clients now?
• Cyber Risk & Breach's as a result of COVID
• Re-Entry Recommendations
• Our approach to Cyber Risk
• Why Cyber Insurance?
• Questions
Agenda

34. • PPP Loan Applications and Forgiveness
• HR Consulting
• CARES Act Tax Planning
• Budget Monitoring and Reforecasting
• Cash Flow assistance
• Product Cost Analyses
• Cyber Advisory Services
What Are We Doing For Our Clients Now?

35. • Company's scrambling – not
prepared (BCP/DRP)
• Lack of expertise & oversight
(MyISO/vCISO)
• No continuous monitoring – No one
watching! (MDR/MSSP)
• Cyber Security has been overlooked
– UNTIL NOW! (IGNITE/ISRA)

36. Three Primary Cyber Breaches (#1)
Not a breach, just an incident:
• The attack impacts availability of
systems, but not Confidentiality or
Integrity data or systems
• MASSIVE IMPACT TO REVENUE DUE
TO DOWNTIME AND
INTERRUPTIONS

37. Three Primary Cyber Breaches (#2)
The “Theft” breach:
• Access is unauthorized
• Compromised system
includes access to assets
• Fraud is executed through
electronic transactions
• Money/Assets/IP are
stolen

38. Three Primary Cyber Breaches (#3)
The “Copy”
breach:
• Our data is still there
• Our data is also stolen
• 6-9 months to discover
• $1-3M in average costs,
if it is found
• The single largest loss
event (aggregate) world
wide –and each year
grows

39. Breach Example: Family Owned SMB
• Ransomware (CryptoLocker) 4/6/20
• Business did not have a Cyber Security Risk Framework or controls in place
• Owner relied on local MSP to open network for employees to work from home
through 3rd Party Vendor
• Rea Cyber Incident Response Team (IRT) engaged
• Recovery operations completed 4/16
• Downtime – 10 days
• Annual Sales – $1.2-1.5m
• Total operational business loss Est. $35k
• Total business without IRT - $100k or more
Implementation &
Monitoring
Testing & Updating
Reporting
Training
Controlling Access
Data Retention &
Destruction
3rd Party Risk Management

40. Regardless of the current questions regarding
cybersecurity expectations:
• Multiple industry groups are forming to
establish guidance
• Launch & Implementation of CMMC
• All states now have privacy laws
• Several cyber bills are pending in State and
Federal legislatures (Ohio Cybersecurity
Safe Habor Law – SB220)
• Liability and fiduciary thresholds are being
tested in current court cases
• Cyber events/attacks are skyrocketing; up
400% since COVID
Regulation is coming for
everyone.

41. Recommendations
• What should businesses be doing now?
• Conduct “Re-Entry Assessments” prior to re-entry to office
• Training – prepare your employees and your clients for the inevitable
• Set the expectation of Cybersecurity awareness, today. Bring in your
professionals or trusted advisors (or hire one)
• Utilize a viable and accepted framework to evaluate risk
• Go on a “data-diet” today
 Assist your clients in doing the same
 Reduce the attack surface
 Treat data like cash
• Do these five things now, right now:
 Backup and test your critical data, maintain proper patching,
continuously inventory all of your assets, train your employees
on threats, routinely audit access

42. Rea Cyber Approach
• Unique hands-on approach to building a successful
“Defense in Depth” cybersecurity roadmap directly aligned
with clients’ business objectives
• IGNITE Program – Cyber Security program w/ ISRA – NIST-
CSF
• DATA FIRST – Where’s your data? Is your data encrypted?
 (InfoGPS w/ DATAnchor)
• Framework focused – starts with a regulatory framework
 (K2 Compliance w/ all cross-walks)
• Consistent Vulnerability Assessment – what's going on right
now?
 Identify what’s hot sharp and dangerous to the business

43. Why Attack Manufacturing?
• Companies have access to a wealth of information that’s
desirable to hackers
Data including intellectual property – product designs & plans
Building specifications & architectural drawings
Financial accounts (yours as well as your clients) all prime targets
• Examples of data that can be breached:
Phishing, spear-phishing, and social engineering scams
Unlocked and misplaced/stolen employee laptops and mobile devices
Unauthorized access to company networks (both you and your clients)

44. What is CMMC?
• Cybersecurity Maturity Model Certification (CMMC)
 v1.02 & NIST 800-171 rev2 Compliance released 3/18/20
• Think of CMMC as a procurement gate that a contractor must
pass to even be eligible to bid on, win or participate on a
contract - without a valid CMMC certification. Five levels
 CMMC Level 1: 17 Controls.
 CMMC Level 2: 72 Controls (includes Level 1 controls)
 CMMC Level 3: 130 Controls (includes Level 2 controls)
 CMMC Level 4: 156 Controls (includes Level 3 controls)
 CMMC Level 5: 171 Controls (includes Level 4 controls)
• What’s the deadline mean? (7/1/2020)
• Framework crosswalk to other regulatory guidelines (NIST-CSF)

45. 5 million apps, 6 billion connected people, 26 Billion devices, 3 million shortfall in Information Security…
C. Roberts, 2018

49. Agenda
• Labor Market Review
• Employee Recruitment & Retention
 Best Practices
 Incentives
• Employer Compliance
 Continued Covid-19 & FFCRA Leave
 Employee Handbooks
 Trainings
• Safety Policies & Procedures

50. Labor Market
• U.S. regained 1.4 million jobs in August.
• Unemployment rate dropped to 8.4%, rate is
down from its April peak of 14.7 percent.
• Unemployment rate for Ohio fell 0.1
percentage points in August 2020 to 8.9%.
• The unemployment rate in Ohio peaked in
April 2020 at 17.6% and is now 8.7
percentage points lower.

51. HR Best Practices
• Recruitment
 Utilize resources to ensure your company hires the right
candidate for the job.
 Be specific in job description and posting
 What are skills that are essential for the job?
 Consider prescreening assessment resources to hire for
candidate “fit” to job:
• Predictive Index
• Be specific in job description and posting
 Employee Referral Incentives/Programs

52. HR Best Practices
• Employee Retention
Consider including the following to be competitive:
• Insurance benefits
• Medical, Dental, Vision, LTD, Life, AD&D, Short
Term
• Paid Time Off, Sick Pay
• 401(k), Profit Sharing
• Performance Coaching program & feedback
• Training & development programs

53. Employee Retention
• “Stay Interviews”
 Facilitated by internal or external source
• Complete Employee Surveys
 Facilitated by external source to assist with
confidentiality.
• Employee recognition programs
 Service Awards
• Employee Cookouts – Food is always a winner!

54. Poll Question #1
Is your
organization
currently hiring key
talent?

55. Policy Compliance – Employee Handbooks
• Employers should ensure employee handbook and
safety policies are updated.
• Consistent and current policies assist with
administration and mitigate risk for employee lawsuits.
• Provides your employees with resources regarding
company information and expectations.
• Employee Signature Acknowledgement forms provide
documentation for compliance and enforcement.

56. Policy Compliance – Employee Handbooks
• Policies should include the following:
 FFCRA – effective until December 31, 2020
• EFMLEA & EPSLA – Recommendation to keep
separate from handbook
• FMLA – How do the above work together?
 ADA
 Pandemic & Emergency Preparedness
 Attendance
 Paid Time Off

57. Employee Trainings
• Annual employee trainings conducted &
documented for:
 Harassment & Sexual Harassment – ALL employees
• Train Supervisors & Managers in a separate training
 Workplace Violence
 Supervisor & Manager Trainings

58. Poll Question #2
How recently has
your organization’s
employee handbook
been updated?

59. Policies – Handbook & Safety
• Safety policies should include the following:
Training on new CDC guidelines, employer expectations
Worker’s Compensation
Accident reporting process
Completion & documentation of annual safety trainings
• Bloodborne Pathogens
• Hazardous Communications
• Lock Out Tag Out
• Forklift Safety
• Industry Specific

60. Recommendations
• Conduct annual HR Audit of current policies & procedures
including I-9 completion and Department of Labor policies.
• Ensure Workplace Employment & Safety Policies Posted
• Review employee handbook & update policies
• Conduct Document Employee Trainings – Safety & HR
• Consistent & timely communication with your employees

61. Free Resources Provided for our Listeners
• http://www.jfs.ohio.gov/
• www.dol.gov
• www.eeoc.gov
Employment
&
Compliance
• www.reacpa.com/service/covid-
19-resource-center/
• www.ohiodcd.gov
• www.cdc.gov
Compliance
& Covid-19