There is no way around it, you MUST pay sales tax!
I was just working on something and I was reading some comments, and a couple people were talking about not paying sales tax, and it made me think I guess I should record a video on this.
If you are not paying sales tax, fix that tomorrow, fix that next week. The sales tax office will take you down faster than the IRS. There is no scenario where you do not have to pay sales tax. Sales tax law varies in different states in terms of what’s taxable, but you have to pay sales tax across the board. If you don’t pay it, they’ll freeze your bank accounts. They will end you. They will shut you down.
I know so many companies, so many successful companies, and I can’t tell you how many times I’ve heard the story, we had somebody on our team that didn’t pay the sales tax. We were collecting it, but it didn’t get paid. We had somebody that didn’t do the payroll tax filings, or we had somebody that didn’t pay the payroll tax, and we didn’t realize it, and we were spending that money to run the company, and then we got a bill for a hundred grand. This is really, really serious stuff. I’m not condoning this, I’m just saying I would not pay my personal taxes before I wouldn’t pay sales tax. It’s that big of a deal. Just, again, to be clear, I would absolutely pay my personal taxes and all my personal taxes. I’m just saying in the order of risk, the sales tax office will end you. You’re stealing their money, especially if you’re collecting it and not paying it. It’s a really big deal.
I’ve now seen these comments, and I’ve heard people say this many times. I’ve had this question many times. You have to collect sales tax. It will have very little affect on you selling work. Everything is taxable these days via sales tax. A client expects to pay sales tax. It’s a non-issue, and when you quote prices, you don’t quote prices with sales tax. You say, “Hey, it’s fifty bucks,” and then you charge them fifty bucks and their sales tax at the bottom of the invoice. It doesn’t even have to be a point of discussion.
Years and years and years ago, we bought a company. This is at the very beginning of our business. We bought a company that wasn’t paying sales tax. We didn’t know how to immediately start charging them sales tax. It was going to take me a little while to go back to all those clients and tell them we had to start charging sales tax, so we ate the sales tax, and in our market, it’s 8.25%. We ate that money until we started charging sales tax, because it is absolutely not worth the risk.
You could build this great, successful business, and then three years from now, you get hit with a massive bill, and that could put you under. Or you could go five years, and then, one day, you get hit with this massive bill and penalties, and then that’s the end of your business. Or you’ve got this debt hanging over you for years to come, that’s going to kill all of your future growth, because you won’t have any money, because all the money is going to pay off this old debt.
Let’s say, for example, you don’t collect a hundred thousand in sales tax. You can’t go back to the clients and collect a hundred thousand. That’s got to come out of profits. So you’re going to have to make a whole bunch of money, pay tax on it, and after tax, pay off that hundred thousand dollar sales tax bill.
It is not worth it. Pay your sales tax. If you’re not doing it, don’t wail till next year. Figure out how to do it right now. Start solving the problem and fix it. It is absolutely critical.
I hope that if you’re not paying sales tax, that encourages you to go do it immediately. It’s that big of a deal.