Answers with Adam:
Question: Is there something I can do in the meantime to avoid making mistakes while I'm figuring out the best way to handle my business's sales tax?
CFO Adam:
Sales tax is the bane of every business owner that has to deal with sales tax. It's the bane of their existence. And for most accountants it is too. There are some kind of national providers that will do all of that for you, but you're going to pay that price. And if you're shipping to 50 different states with 50 different set of sales tax rules... monitoring all of that and understanding all of that is difficult.
It's why a lot of businesses fail. Because, "oh, I didn't do all of this," and then all of a sudden the state comes knocking and says, "hey, we'd like our sales tax money." And you're like, "I don't have it, I spent it, it all went into my bank account."
This is where I give a tip to anyone in that kind of retail/e-commerce, whether they're brick and mortar or e-commerce, is to have a separate sales tax account.
So when you're collecting that money, you immediately transfer that over. So even if you don't remit it right away, whenever any state comes to you, that money is sitting there and in a lockbox that you can't touch (except for that purpose to send it into the states and not leaving it in the operational account).
The likelihood is that it's going to be spent on whatever. It's like, "I needed to buy some advertising. I needed to buy some new inventory. I've got that money there, I'm going to use it." And then sales don't come in. And then that state does come asking for it. And now you're trying to figure out, "how am I going to write a $2,000 check to California when I don't have $2,000 to write a check to California?"
Some of those little pieces are really important as well. And that's all from the operational side on the finances that again, business owners aren't really comfortable with, and they just typically throw their hands up and they're like, "well, they're probably never going to catch me."
And that's the worst mindset to have in those situations because undoubtedly you're going to be the one.
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Disclaimer: This article contains information and opinions from Adam Kae & Associates, and the information and opinions should not necessarily be seen as the best possible solutions for your business. Please contact us at info@adamkae.com to help you find the best solutions for your business.
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