“What do you mean by ‘negligible’?” Matt asked.
“Less than ten thousand in royalties,” Andy said. “Sales of Next Phase did pick up a bit in the first quarter when Hard Times was at the peak of popularity, otherwise you wouldn’t have even had that much.”
Matt shook his head sadly. “People just don’t get what I was doing with Next Phase,” he said.
“Hey,” Andy said, putting the grin back on his face, “I got what you were doing with it, Matt. I always thought it should have sold better.”
“Really?” Matt said, his eyes boring into the accountant’s. “What was I doing with it?”
“Uh ... well ... you know, you were trying to get your music out to the people ... trying to put it down like it is, like it should be. Shit like that.”
“Wow,” Matt said with an eye roll. “That’s fuckin’ profound, Andy. It’s like you were right inside my goddamn brain there. I guess you really do understand me after all.”
“Goddamn right I do, Matt,” Andy said, completely missing the sarcasm.
“Yeah,” Matt said. “Anyway, we were talking about my money?”
“Right,” Andy said. “In addition to the revenue you’ve pulled in for your solo efforts, you’re still pulling in a considerable chunk of change from Intemperance royalties. Between continuing album sales of all Intemperance releases, but particularly Greatest Hits, which sold more than three million copies over the first half, combined with licensing fees when National grants use of one of the tunes for a TV or radio commercial or use in a film, adds up to just a hair under two point eight million dollars.”
“Not bad,” Matt said appreciatively. Though he had been opposed to National releasing that Greatest Hits bullshit (not that his opposition meant a goddamn thing) he had to admit that it was bringing in some serious coin for him.
“Not bad at all,” Andy agreed. “We add in another ninety-six thousand or so for incidental income—things like capital gains on investments, interest income from the various accounts and certificates of deposit your easily liquidated wealth is stored in, and miscellaneous payments for things like compensated media appearances. The bottom line for the first half is about seven point eight million dollars in income.”
“Uh huh,” Matt said. “Sounds like a lot. But how much is going out in taxes?”
“Not as much as you might think,” Andy told him. “Your tax payments for the first quarter were four hundred and eighteen thousand dollars, which has already been paid. Tax payments for the second quarter, which I will be sending out at the end of the week, are four hundred and thirty-two thousand dollars, give or take a few hundred. That means, for the first half of 1994, you will be paying a combined total of eight hundred and fifty thousand dollars in federal and state taxes.”
Matt was not sure he was hearing correctly. “Eight hundred and fifty grand?” he asked. “On seven point eight million in income? Is that what you’re saying?”
“That’s what I’m saying,” Andy agreed, grinning happily.
“That’s not very much,” Matt said. “When I was making half that amount on Intemperance alone, your old man was paying out more than twice that in taxes for me. Are you sure you did your math right?”
“Of course I did my math right,” Andy said, insulted at this suggestion. “I stand by my figures. Remember, my name is on those tax documents as well as yours.”
“Not that I’m complaining,” Matt said. “I’m all for keeping as much of my money as I can, but that seems like an awfully low amount for taxes. I don’t want to be getting in trouble with the fuckin’ IRS, you dig?”
“There is nothing to get into trouble about,” Andy assured him.
“Then why did I pay so much more when your old man was figuring this shit out?”
“It’s very simple,” Andy said. “My father was very conservative, very by-the-book. He was too cautious about his accounting practices much of the time and, as such, he did not fully take advantage of the various tax shelters and exemptions that you are entitled to.”
“What the fuck does that mean?” Matt asked.
“It’s very simple,” Andy said. “You don’t live in the United States.”
“What? What the hell are you babbling about? Of course I live in the United States.”
Andy shook his head. “You don’t though,” he said. “Your primary residence is the domicile you own in Cabo San Lucas, Mexico. Though you are and will remain an American citizen, you currently reside outside the United States and therefore the bulk of your income is not subject to taxation by the IRS or the California franchise tax board.”
Matt stared at the grinning accountant for a moment. “Andy,” he said. “I only spend about two weeks out of the year at my pad down in Cabo. This year I ain’t been there but a few days.”
Andy simply shrugged. “The IRS and the franchise tax board don’t know that. They have no idea how much time you spend there and they have no way to determine that information. That foreign domicile is worth its weight in gold, Matt. It frees you up from the obligation of paying United States and California taxes on your primary income.”
Matt scowled. This sounded way too good to be true. “This shit don’t sound legal to me,” he said.
“It’s a perfectly legitimate loophole in the tax codes,” Andy assured him.
“Then why am I paying any taxes at all?” Matt asked.
“Because, unfortunately, you can’t have it all. All of your Intemperance-based income is still subject to US and California taxation because it stems from a legal agreement—your Intemperance contract with National Records—that was forged and approved before you purchased the home in Cabo San Lucas. Therefore, we cannot claim that living outside the United States relieves you of the taxation burden for that income.”
“Why not?” Matt asked. “The money I make for my solo albums is money that is earned in the United States, isn’t it?”
“Yes, of course,” Andy told him. “But the establishment of that income stream took place after you left the United States for Mexico, therefore it is tax exempt.”
Matt furrowed his brow a bit. “Are you sure about this?” he asked. “Something about this whole deal just doesn’t sound right.”
“I am absolutely sure,” Andy said confidently. “I have a Bachelor’s degree in Business and a Master’s degree in taxation. I know what I’m talking about. You can take that to the bank.”
“All right,” Matt said slowly. “I guess you’re the expert on this shit.”
“That’s right,” Andy told him. “Now, while we’re on the subject of your Intemperance revenue, I feel that I should point out to you that you are missing out on a significant portion of it.”
“What do you mean?” Matt asked. “I’m losing more than just the taxes from those album sales?”
“You are,” Andy said. “Pauline Kingsley is no longer your manager, correct?”
“That’s right,” Matt said. “I don’t have no fuckin’ manager anymore. I don’t need one.”
“I will be the first to agree that you do not need a manager,” he said. “But Ms. Kingsley is still collecting twenty percent of your Intemperance income right off the top. That hardly seems fair since she is no longer representing your interests.”
“Yeah, but she’s the one who negotiated that Intemperance contract for us back in the day. Without her, we never would’ve been able to get in a position where we were actually making money from National. I’d say she earned her twenty percent.”
“Well, of course, back in the day she did,” Andy said. “And it was both required and appropriate for you to compensate her at the rate of twenty percent back then. But what is she doing for you these days?”