This post continues prior writings in which I discuss the Wisconsin Department of Revenue’s assertion that an individual should be personally liable for sales taxes. This post gives some generic examples as to how this can happen.
While the circumstances leading to the non-payment of sales taxes often come from entirely different directions, the consistent part among all of these situations is that the Department of Revenue believes that sales taxes that are owed and have not been paid. This could be the result of an audit that increased the amount of sales tax owed, a busy start-up business has a proprietor that simply was unable to keep up with his sales tax obligation due to a heavy workload or a struggling business decides to use the sales tax collected to pay suppliers rather than the State.
In tougher economic times, a business that is struggling to maintain its operations may make the decision to use the collected sales tax to pay its suppliers. This may be understandable, after all, if it does not pay its supplier, it will not be able to continue operating and, therefore, could not pay the sales tax that is owed. Their belief is that if they buy additional supplies, they will generate sales great enough to pay off the now past due sales tax liability and any sales tax that arise from that weekend. Unfortunately, often the following weekend is not as successful as the business had hoped and now sales taxes cannot be paid again. This problem often cascades into an unwieldy amount of tax, interest and penalty due and the result is that the business cannot pay what is owed.
While the circumstances leading to the non-payment of sales taxes often come from entirely different directions, the consistent part among all of these situations is that the Department of Revenue believes that sales taxes that are owed and have not been paid. This could be the result of an audit that increased the amount of sales tax owed, a busy start-up business has a proprietor that simply was unable to keep up with his sales tax obligation due to a heavy workload or a struggling business decides to use the sales tax collected to pay suppliers rather than the State.
In tougher economic times, a business that is struggling to maintain its operations may make the decision to use the collected sales tax to pay its suppliers. This may be understandable, after all, if it does not pay its supplier, it will not be able to continue operating and, therefore, could not pay the sales tax that is owed. Their belief is that if they buy additional supplies, they will generate sales great enough to pay off the now past due sales tax liability and any sales tax that arise from that weekend. Unfortunately, often the following weekend is not as successful as the business had hoped and now sales taxes cannot be paid again. This problem often cascades into an unwieldy amount of tax, interest and penalty due and the result is that the business cannot pay what is owed.
As the Department of Revenue gets wind of the problem, they will take action to collect the liability from the business. When those efforts prove unsuccessful, they will look to any person who could possibly be responsible for the liability.
I can say, in no uncertain terms, that the above scenarios are not the result of good business decisions. Regardless of whether it seems like a good source for a bridge loan, using sales taxes to operate a business is not, and cannot come to good. The taxing authorities have collection powers that are the envy of all creditors. Unlike many creditors, the Wisconsin Department of Revenue can (by virtue of a specific statute) look right through any corporate or LLC liability shield to collect tax from individuals.
The point is, if you want to avoid having to hire someone like me to keep the Department of Revenue out of your personal lives, make sure that the sales taxes you or your business collect get turned over to the state. If it is too late for that, there can be several options for resolving the problem, but it is best to avoid the issue in the first place.
I can say, in no uncertain terms, that the above scenarios are not the result of good business decisions. Regardless of whether it seems like a good source for a bridge loan, using sales taxes to operate a business is not, and cannot come to good. The taxing authorities have collection powers that are the envy of all creditors. Unlike many creditors, the Wisconsin Department of Revenue can (by virtue of a specific statute) look right through any corporate or LLC liability shield to collect tax from individuals.
The point is, if you want to avoid having to hire someone like me to keep the Department of Revenue out of your personal lives, make sure that the sales taxes you or your business collect get turned over to the state. If it is too late for that, there can be several options for resolving the problem, but it is best to avoid the issue in the first place.
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