By definition, a tragedy is an event causing great suffering, destruction, and distress such as a serious accident, crime or natural catastrophe. One may read that definition and scoff. How can sales tax lead to such a serious conclusion? Tragedy, really? Yes, really. There can be weighty consequences for not paying sales tax correctly. The consequences can be both civil and criminal in nature. How? Let’s get into it. Here are some real-life scenarios that involve tragedy and sales tax.
Scenario Number 1
According to North Carolina Department of Revenue in 2021, a business owner was arrested on felony tax charges filed by the state. He ended up being charged with five counts of embezzlement of state property. Warrants allege that the owner aided and abetted the business to embezzle, misapply, and convert to its own use over $500,000 in state sales tax. Since the owner of a business is deemed to be the responsible person of the business and is under duty to collect, hold in trust and remit the sales tax to the state, the charges were put upon him.
Now, it’s not our place to decide if this particular business owner was aware of his sales tax obligations or not. We have no idea what exactly happened in his particular situation. It’s possible he could have been collecting tax and unaware that it was not getting remitted. It’s possible he was holding onto it knowingly.
The bottom line is, when things like this happen it’s tragic due to its preventative nature. That’s why we do what we do. We want to help businesses avoid such heavy consequences by keeping on the correct course of sales tax.
Scenario Number 2
The Tenessee Department of Revenue conducted an investigation that led to the arrest of a business owner in the state of Tennessee. She was ultimately indicted on one felony charge of theft, 13 counts of money laundering and 36 felony counts of tax evasion. These indictments alleged that this business owner underreported taxable sales and did not remit additional sales tax collected from the customers.
“Investigations, such as this one, should warn retailers that failing to properly remit all the sales tax monies they collect is a crime, “ Revenue Commissioner David Gerregano said. “The taxes collected from customers are property of the state and local governments at all times. Customers have a right to know that the tax they pay will be remitted to the state and used for the public good of all Tennesseans.”
The consequences to such actions can lead to time spent in prison with fines on top of that.
Again, we have no idea what this business owner's exact situation was in particular.
Sometimes business owners are simply unaware of their responsibilities or have not been educated properly around the rules and regulations of sales tax.
Another potential scenario is sometimes people hear of situations like this and they find themselves acting out of fear. They immediately want to cover all of their bases and just collect everywhere at the highest rate possible to hand over to the state. They don’t want to get in trouble so they overcompensate. However, that’s not any better and you can (and most likely will) find yourself slapped with a class action lawsuit. It is best to find safety in education and knowledge, rather than acting out of fear.
Prevent Tragedy in Not Only Your Business but Your Life
If you find yourself dealing with sales tax and unsure what to do, or you’re questioning the accuracy and faultlessness in your sales tax process please reach out to a professional.
Don't put your head in the sand and ignore it. Sales tax is a margin killer. If you don’t collect it eventually it will come out of your pocket with penalty and interest which has the ability of wiping out all sales margins for years, and could end your business. Oftentimes people ignore it due to being afraid of the costs associated with becoming compliant. But each month you are not compliant will be even more costly.
Find Confidence in Collaboration
That being said, it is best not to go in alone with sales tax. If there are missteps in your process and you are audited there are hefty consequences, as previously mentioned.
When it comes to sales tax, we are here to help. This is what we do.
We can help provide peace of mind and comfort. Let us point you in the right direction, walk with you along the way and/or provide support when audited or you find issues arise. We have helped countless clients mitigate liability and course-correct to avoid exposure. We want to help in every way we can.
Jump on a What’s Next Call and utilize free collaboration so you can know what to do and how to proceed. Gain confidence in your situation. If you find yourself in trouble, don’t wait any longer to get help. Every situation is different in its complexities and risk factors, but we can help you find a way to remedy and mitigate your situation. If your business is in jeopardy, so is its owner. Peace of mind is a phone call away.