Advice from a Rochester, NY, Attorney for Small Businesses: Why Sales Tax Compliance Matters

Advice from a Rochester, NY, Attorney for Small Businesses: Why Sales Tax Compliance Matters

If you're looking for good advice from a Rochester, NY, attorney for small businesses and you sell taxable goods or services, this article will explain why sales tax compliance matters. Learn what can happen when you fail to stay current with your taxes and why this can quickly become a serious legal and financial problem. Ronald J. Axelrod, small business attorney in Rochester, NY, explains the importance of maintaining good tax records and staying current with your sales taxes.

What Does ‘Staying Current’ with your Taxes Mean?

• Collecting the correct amount of sales tax from customers

• Filing the required tax returns on time

• Paying the tax owed to the state

• Keeping accurate records

Why Is It Important to Maintain Good Tax Records?

Here are a few more good reasons why you should stay current and pay close attention to your quarterly tax obligations:

• Helps ensure that you don’t accidentally spending money that belongs to the state

• Prevents large year-end tax bills

• Avoids state penalties

• Forces you to review your finances on a regular basis

• Stabilizes day-to-day operations and helps better manage cash flow

 

Sales Tax is Not Extra Business Income

Sales tax collected from customers should be treated as money held for the state, not operating cash. Sales tax should be viewed as a liability that is temporarily being held ‘in trust’ for the government. Too many people treat sales tax money that they have collected for the state as their income and commingles this money with their own sales money. Treating sales tax money as your own is one of the primary reasons businesses go out of business in the first year or two of their existence.

What’s the Worst that Can Happen?

Failing to pay your taxes can result in severe consequences. State and federal tax agencies can take aggressive action and have the power to have you criminally prosecuted when you have kept trust fund assets and not remitted the money to the state. They can also lien or seize your business assets and in some cases, your personal assets.

Selling Your Business?

Selling Your Business?

If you plan to sell a business in New York, any unpaid sales tax can become the buyer’s responsibility, if they are not paid by the seller. The buyer must generally notify the New York State Department of Taxation and Finance before closing when purchasing the business’s asset, and they will advise if any past due amounts which will have to be paid at closing. If your sales tax obligations are current, all these complications and embarrassment can be avoided.

The buyer’s failing to provide the required notice can leave him personally responsible for the seller’s unpaid sales tax. That liability may exceed the purchase price assets being purchased.

By filing the notice on time and following the Tax Department’s instructions, the buyer can generally protect themselves from this liability. Addressing unpaid sales tax early can also help prevent closing delays, unexpected expenses, and other complications during the sale.

(For more information about selling your business, read our Blog articles: Selling Your Business?, Four Fatal Mistakes when Selling Your Business, Buying or Selling a Business?)

When Should a Small Business Owner Talk to an Attorney?

A CPA may help with filings, but a small business attorney can help business owners understand legal risks, business structure issues, liability concerns, purchase/sale issues, and how to address problems before they grow and become unmanageable. As a small business attorney in Rochester, NY, Ronald J. Axelrod helps business owners understand the legal risks that can arise when tax obligations, contracts, business structure, and day-to-day operations are not handled properly. While an accountant can help with tax filings, an attorney can help you understand how unpaid sales tax may affect your business, your personal liability, and your long-term plans. Contact us to make an appointment with Ron Axelrod or call us at (585) 203-1020. 

Contact Ronald J. Axelrod