I have a colleague who has always felt that I over-dramatize the significance of sales tax. I get that, I really do. I'm in the business, want business people to feel compelled to be compliant, and never want to see someone have to fall on a grenade that should never have been thrown in the first place. I can't argue that I meet the definition of a fanatic, when it comes to my trade.
Just this week my colleague decided to drop by an upscale merchant near his neigborhood, to find that the normal hustle and bustle of this freakishly busy shop was replaced by the sign pictured above. It seems this particular small business owner didn't see fit to handle his tax matters in a fashion that kept him compliant. Clearly he had some warning, but like a number of small businesses, he didn't take the authorities seriously. What happened next is pretty embarassing...and frightening.
This particular state has a writ entitled Fieri Facias (or FiFa) which allows an upaid sales (or other) tax obligation to be assigned to a collections revenue officer at the state, or to a private debt collection agency. The FiFa Notice is legal notice that the state is filing a tax lien and that a State Tax Execution has been issued. A tax lien gets listed on the business owner's credit report and negatively impacts their credit rating, encumbers assets, and remains until the liability is paid off. This is the first stage of aggressive collections, and allows the local government to have legal right to eventually levy or seize assets.
Imagine the shock of a business owner when they realize that their seemingly insignificant misstep with sales tax created this kind of trouble. A store is closed, a credit report damaged, a reputation is sullied, and someone loses the assets in their business. That's a steep personal and business price to pay for a creative business person who just didn't understand that sales tax is serious business. And with the financial pressure on state and local governments these days, you're sure to see more of this kind of drama.
OK...I admit that I'm on the sales tax lunatic fringe. But today, I'm both troubled and proud to say that the lunatic fringe has increased its girth by two - a colleague that was a naysayer, and a businessman that had an all-to-common attitude about sales and use tax. Perhaps the growing lunatic fringe has given you some compelling evidence that sales tax audits are not the only thing to worry about when it comes to keeping your sales tax house in order. Give me a shout if I can help!