As a small business owner with an enormous workload of managing your business, you may fail to see the real significance of business sales tax. Many small businesses find it challenging to manage sales tax. Some are unaware of the consequences for their business if they fail to comply with Sales Tax laws.
Sales tax may refer to a retail ‘point-of-buy’ charge placed on goods and services. The buyer should pay this amount, and this will be remitted to the state or local agency by the seller.
Laws governing sales tax compliance are continually changing. For instance, it now requires E-commerce businesses to pay sales tax. So, you must stay up to date with the laws governing sales tax compliance to make sure that your business does not incur unwanted risks.
Neglecting to pay the tax can lead to unwanted events for your business. The least of these events may require that you pay penalty fees. However, it may be so much more than fines.
Bearing this in mind; here are the consequences that may apply to your business if you fail to pay Sales Tax:
As said earlier, you may have to pay penalty fees for failing to collect or remit sales tax. When you fail to obtain the tax from the buyer, you must pay it, hence, incurring more debts than is necessary for your business.
The amount of penalty fees may be quite steep and can cost your business a lot of money in paying the tax owed, including fines. Many states charge a flat rate for the original tax due; sometimes these penalties may be applicable even if you are due by only a day.
Penalties may be up to 5% of the tax owed or more but are subject to the individual states. The average sales tax penalties imposed on sellers by states is about 17.85%.
The IRS cannot waive interest, so, depending on the amount of time involved, it may require you to pay the time value of the money you owe. Therefore, your penalties may be penalty plus interest amounting up to 4%. States charge an average of 6.5 percent or more as interest on penalties
Typically, sales tax and income tax are reported differently, so businesses may try to evade sales tax. Tax evasion is a serious crime and you don’t want to be caught! If you are found wanting, the IRS will eventually catch up with your actions, and you might be audited.
These audits may interrupt your business activities and are quite unpleasant. Also, it may go back as much as six years into your business history in the search for any substantial errors.
A lien typically means the IRS may lay claim to your property in order to collect the debt owed. When you fail to pay tax, the IRS may issue this claim, and you might lose a significant portion of your business assets.
A debt owed the IRS is the same as a debt owed elsewhere. A sales tax lien issued to you may reflect on your credit report. This may adversely reduce your chances in the future to receive business loans that can help your business growth.
Jail term may be unusual, but it applies if the events surrounding your failure to pay tax are severe.
Rather than focusing on the fears of the scenarios that can apply to your business if you default by chance, it would be an excellent step in the right direction if you let us guide you with your business sales tax needs. Contact us today at (212) 320-8191 or by email at email@example.com.
Urgent Tax Services
6009 16th Ave,
Brooklyn, NY 11204
Ph. (212) 320-8191
Fax (646) 626-6447