The Cost of Doing Nothing
Updated: Jun 27, 2020
When it comes to sales tax compliance, it's very tempting to put the the issue in a dusty corner so it can be dealt with when the time is right, the company is more established, more resources are available. There are so many pressing issues to grow sales and improve profits. More people are needed to support the business, more marketing spending is needed stay relevant, not to mention the systems upkeep and upgrades to make it all work.
Your sales are growing every year, $1M two years ago, $2M last year and in spite of COVID-19, you're halfway to your goal of $4M this year. When the business started, all the sales were in your home state, but as of last year, your customers are in every state. You almost broke even 2 years ago, finally made a small profit last year and can finally plan to take a salary this year after making $300k.
All the while, sales tax compliance has been an afterthought. Unfortunately, over the past 2.5 years, there has been a hidden potential expense of about 10% of sales that doesn't show up on your P&L. If the states uncover this problem and ask for their rightfully owed missing revenue plus penalties and interest, you're on the hook for about $500k!
Another consideration is if you are planning on eventually selling your business. Sales tax will definitely be reviewed in detail during the due diligence process! Even if the states don't find you by the time you sell your business, your buyer will decrease the amount they are paying or you will continue to be responsible for any future audits related to back taxes and penalties/interest well after you've sold your business!
As with most things, the best time to do things right is yesterday and the next best is today, before they grow into a large problem.
Fortunately, when it comes to sales tax compliance, there are several low cost, automated solutions that can be deployed quickly. At Goudy Square Consulting, our focus is implementing sales tax solutions so you can focus on growing your business and keeping your profits to invest as you see fit.