Understanding the tax treatment of business meals, entertainment, and related expenses continues to be a challenge for many business owners. Deductibility rules have shifted over time, temporary provisions have expired, and additional changes are scheduled to take effect beginning in 2026. As a result, expenses that were once fully deductible, or partially deductible, may now be limited or disallowed altogether.
The IRS rules governing business meal deductions, entertainment expenses, employee meals, and business gifts are highly specific and documentation-driven. Misclassifying these expenses can lead to missed deductions, compliance issues, or unwanted scrutiny during an audit. This is especially important for businesses that frequently incur client meals, employee travel expenses, or host employee events.
To help businesses navigate these rules with confidence, we’ve created a Meal and Entertainment Quick Reference Guide. This resource outlines the current deductibility rules and highlights upcoming changes so business owners and financial decision-makers can plan ahead and avoid surprises at tax time.
Have additional questions? Contact our tax experts to learn more.
Tax laws and guidance continue to evolve. To stay informed about changes that may affect your business, follow us on LinkedIn and Facebook or sign up to receive our newsletter, where we regularly share timely tax updates and insights.
We’re honored to share that our Payroll Department has been awarded Gold in this year’s Evansville Community Choice Awards!
Our payroll professionals work hard behind the scenes to support the businesses that keep our region moving. From accuracy and compliance to service and responsiveness, they take pride in doing the kind of work most people only notice when something goes wrong. So earning recognition from the community means the world to us.
To everyone who voted, THANK YOU. Your confidence inspires us to continue raising the bar and delivering payroll services that make your operations smoother and your lives easier.
We’re grateful, we’re energized, and we’re ready for another year of serving our community.
Is your business paying significant duty and excise tax on foreign imports? If you import raw materials to manufacture and sell the product in the United States or re-export the finished product, you might be able to benefit from a foreign trade zone (FTZ).
What is a Foreign Trade Zone?
The U.S. government first created foreign trade zones to attract and promote international business in 1934. Manufacturing activity in FTZs became broadly permitted starting in 1971. Today, there are 260+ FTZ projects and nearly 400 subzones nationwide, serving as critical hubs for manufacturers, distributors, and e-commerce companies.
The term “foreign trade zone” (FTZ) means a discrete area located in or adjacent to a port of entry that is authorized by Congress to receive preferential treatment under the customs laws of the United States. FTZs are not considered to be in the customs territory of the United States. This allows a business to import and store foreign merchandise without paying customs duties or Federal excise tax until the merchandise enters U.S. commerce.
2025 update: With the elimination of the de-minimis exemption in recent trade policy changes (which had previously allowed duty-free imports under $800), FTZs have become even more valuable, especially for e-commerce and consumer goods companies facing higher tariff exposure.
What will an FTZ do for me?
There are several benefits for a business to utilize an FTZ. A manufacturer that imports raw material into the United States is required to pay duty at the time the raw material enters the country. However, merchandise or goods brought into an FTZ are not assessed duty until the merchandise leaves the zone or enters U.S. commerce.
In addition, if the imported merchandise is brought into an FTZ and then exported back out of the country and does not enter into U.S. commerce, no duty is ever due. There are also no time limitations on how long goods can remain in an FTZ, regardless of whether the goods are subject to duty.
Why this matters now: In today’s volatile tariff environment, in which a universal 10% tariff began in April, and county-specific ‘reciprocal tariffs’ fully took effect in recent trade policy changes, companies are relying on FTZs to defer duty costs and preserve cash flow until the moment goods actually enter the U.S. market. Note that many of the reciprocal tariffs were paused, delayed, or modified as continued negotiations take place.
U.S. Import Duty Basics
U.S. duty or import duty is a tax on goods that arrive in the United States Customs port with the intent to unload the goods and enter them into U.S. commerce. There are several different types of import duties, which are calculated in a variety of ways. The import duty depends on the type of product imported, how much is being imported, its declared value, from which country the product was exported, and several other factors. The import duty can range from zero to 100% or more of the product’s declared value.
Tip: FTZs also provide “inverted tariff” benefits — where duty rates on finished products may be lower than on raw components. In those cases, companies can choose to apply the lower finished-goods rate, which can create significant savings.
Can I Manufacture or Assemble in an FTZ?
Generally, yes. Foreign and domestic merchandise brought into an FTZ can be manipulated or manufactured in the zone unless it is prohibited by law. The business can then store, sell, exhibit, separate, repack, assemble, distribute, sort, grade, clean, mix with foreign or domestic merchandise, or manipulate the merchandise within the FTZ.
Foreign production equipment, such as machinery or parts for specific equipment to manufacture merchandise, may be brought into an FTZ. No duty shall be assessed on imported production equipment until it is completely assembled, installed, tested, and used in the production for which it was intended.
A business that manufactures in an FTZ does not pay duty on waste, scrap, and yield loss. For example, a plastic facility manufacturing polysulfone (5% duty) imports and uses the raw material polypropylene (also 5% duty). During the production process, 10% of the raw material polypropylene is scrapped and considered obsolete. If this business operates outside an FTZ, it will pay $50,000 in duty on $1,000,000 of imported polypropylene. If the business utilizes the FTZ, no duty is owed on the polypropylene when it is brought into the zone. In addition, 10% or $100,000 of the polypropylene is lost during the production cycle. Assuming all of the end product is sold in the U.S., the 5% duty totals only $45,000. This is a savings of 10% in duty.
Modern twist: Increasingly, FTZ manufacturers are using automation, blockchain tracking, and real-time customs compliance software to streamline operations and reduce compliance risks. These tools make FTZ participation easier and more efficient than in years past.
Additional Benefits of FTZs
An additional benefit of an FTZ is protection against theft. After the merchandise has been manipulated or manufactured in an FTZ, the merchandise will be taken under the supervision of the Secretary of the Treasury. As long as the tariff classification has not changed since entry or during the manufacturing process, merchandise will be taken under supervision through electronic compliance systems, audits, and site inspections within the foreign trade zone. A declared value will be determined, and the duty or excise tax on the merchandise exempted while in the FTZ.
Bottom Line
There are several benefits to utilizing an FTZ. In 2025, FTZs are increasingly considered essential tools for tariff management and supply chain resilience. Whether you’re a manufacturer, distributor, or e-commerce retailer, the use of an FTZ can increase cash flow and profitability under the right circumstances.
Have questions about how an FTZ strategy could benefit your business? Reach out to our manufacturing industry experts. As leaders of our Manufacturing Industry Team, Brant and John can help you evaluate opportunities, model potential savings, and navigate the application process.
This article provides general information and should not be considered specific tax or legal advice. Consult qualified professionals for your specific situation.
We’re honored to be recognized on Inside Public Accounting’s Top 200 Firms list again this year!
This achievement reflects the dedication of our incredible team and the trust our clients place in us every day. We’re proud to be making an impact in the industries we serve.
Harding, Shymanski & Company is proud to be recognized as a Great Place to Work® for 2025–2026 — and it’s all thanks to our amazing team!
96% of employees say HSC is a great place to work (vs. 57% at a typical U.S. company)
94% of employees say they felt welcomed when joining our firm
This certification celebrates what makes HSC special: our people, our culture, and our commitment to supporting one another every day. We’re honored to receive this recognition and even more proud to know it comes directly from our employees.
Harding, Shymanski & Company (HSC) is proud to be ranked among the Top 50 Construction Accounting Firms™ in the U.S. by Construction Executive magazine.
The annual ranking recognizes firms with specialized expertise in serving the construction industry, based on factors such as percentage of revenue from construction clients, staff resources dedicated to construction, training and certifications, and industry thought leadership.
For 50 years, HSC has partnered with contractors across the Midwest and beyond, helping them navigate complex financial challenges while improving profitability and long-term stability. From bonding and surety requirements to succession planning and project-based tax strategies, our Construction Services team provides the insight and solutions contractors need to succeed.
This ranking underscores HSC’s long-standing commitment to the construction industry, one of the firm’s largest practice areas. Our specialized knowledge, coupled with personalized service, continues to make us a trusted advisor for general contractors, subcontractors, and specialty trades.
The One Big Beautiful Bill Act (OBBBA) contains wide-ranging tax changes that could significantly impact manufacturers. Key provisions in the Act include:
Cost of capital: 100% bonus depreciation is now permanent and new incentives for qualified production property aim to boost expansion, productivity, and supply chain strength.
Debt: Restored favorable interest deductibility under section 163(j) improves the tax efficiency of debt-financed investments and may enhance access to capital.
Research and development: Immediate expensing of U.S.-based R&D costs and certain U.S. international tax reforms may free up capital for innovation and increase the value of domestic R&D tied to foreign sales.
Entity structure: Expanded small business stock exclusions and changes to international tax rules may influence entity choice, after-tax cash flow, and global tax strategy.
Global footprint and supply chain: Reforms to U.S. international taxation, along with ongoing tariff pressures and OECD Pillar Two implications, require manufacturers to reassess sourcing, trade flows and tax exposure across jurisdictions.
Want a deeper dive? Reach out to your HSC Representative or read more here.
