This has been a week of delivering bad news to companies who contacted me only after being notified by a state taxing jurisdiction that they were not in compliance. As predicted, their first words were “Why didn’t someone tell me _________”? It’s really hard to know how much of this whining to believe. Over the years I’ve found business of all sizes to fit into one of three categories when it comes to sales tax (and probably other taxes):
1. Those that don’t want any information or advice unless they initiate the dialog.
2. Those that solicit information and promptly ignore or don’t believe the advice they get.
3. Those that welcome and follow the advice from trusted advisors and implement their suggestions as appropriate
When I get calls from companies who find themselves in trouble, it’s hard for me to figure out which category they fall into. Almost all of them have an outside CPA so I know that they are having some interaction with a tax professional at some point in the year. Whether their advisor knows anything about sales tax is a different story (and different blog entry).
Regardless of the type or quality of advice these businesses may have received, it is still startling that the owners have taken no initiative to find out what their obligations were as a multistate business. How, in once case, could a contractor doing business in 10 states not wonder if they had any type of multistate sales tax or income tax problem? Did they just think that they could wonder from state to state doing construction projects without having any type of state tax issues? (Apparently the answer was “yes”).
This type of ignorance is dangerous to the business and the business owner. With more states enforcing their officer liability rules, the owners and officers of the companies are now personally liable for the ignorance (or lack or curiosity) of their business managers when it comes to multistate tax. In the short term, ignorance may be bliss, but in the long term, ignorance is dangerous and could be catastrophic for the business and its owners.
Because most CPAs only have a rudimentary working knowledge of multistate sales tax, don’t expect them to be the only resource available to you for quality advice. If you have any questions please contact me for a free 30 minute discussion. https://www.salestaxstrategies.com/index.html
Ned Lenhart, CPA
President