For the latest in my money and business series, this is a guest post written by Debby of Sugar Buzz Cakes. She knows what she's talking about, so listen...
Running a business keeps you, well, running. Ordering supplies, developing client leads, writing contracts, networking, scheduling consultations, and then there’s that making and decorating cakes part of it. It’s easy to let little things slip here and there.
Especially paperwork. Given the choice between filling out some boring tax forms and playing with a new fondant cutter, I think nearly all of us would head to the fondant and get creative.
Aaah, but you can’t. Whether it’s income, withholding, property, or sales and use taxes, you had better stay on top of it.
I spent nearly a decade as a state’s sales and use tax auditor, then more time as a sales and use tax consultant.
I audited Fortune 500 companies, mom-and-pop startup businesses, and everything in between. The various rules, regulations, guidelines, and laws are obscure, vaguely written, and often contradictory. It’s a hassle for businesses, especially small ones, to keep track of it all, and auditors love that.
I’m not going to get into the specific “ins and outs” of sales and use taxes here. But I will tell you that, oftentimes the biggest portion of a taxpayer’s audit bill wasn’t unpaid taxes – it was penalties and interest.
When we handed them the bill at the end of our audit, sometimes taxpayers would scream, turn pale, fire everyone in sight, or even cry. One man even excused himself to throw up.
We didn’t care.
They would howl that their CPA “never told us about sales and use taxes”.
We didn’t care.
In extreme cases, they borrowed money, sold assets, or even liquidated their business to cover the bill.
We didn’t care about that, either.
I’ve tried to share my knowledge and experience on cake forums before, and other forum members flamed me for being a big meanie who was trying to scare people. I’m not trying to scare anyone, I’m trying to tell you how “we”, the government, did our job.
And your job, at least part of it, is to make sure you are aware which taxes your business needs to pay, how much and when you should pay them, and to make sure you have that money available to pay them. And then, you can get back to that fondant!
Thanks for being such a big meanie dream crusher, Debby. And if you're someone who doesn't put money aside for sales tax, you'd better start. Heed the warning!