Sales Tax – The “Un-Tax”

Most of my 20 plus year career in sales tax compliance and consulting has been serving Fortune 500 companies and telecommunications service providers. Virtually all the Fortune 500 companies had a tax department and one or more sales tax professionals on staff and was fully informed and aware of their sales tax responsibilities and liability risks. Additionally, the telecommunications companies without a tax staff were always aware of sales tax as a part of their invoicing process. I never had to educate these clients about their sales tax responsibilities.

I started TaxConnex with the idea of serving small and medium sized businesses that did not have sales tax knowledge or staff working in the business but still had a multi-state sales tax responsibility. The size of this market seemed limitless!   The one factor I did not consider in serving this market was the lack of sales tax knowledge in those businesses. At TaxConnex, we spend the majority of our sales and marketing efforts trying to inform and educate the marketplace on their sales tax responsibilities. As you can imagine, this can be a time-consuming and expensive endeavor.

Why don’t small and medium sized businesses understand their sales tax responsibility? More importantly, why don’t accounting firms and CPAs serving the small and medium sized businesses understand their clients’ sales tax responsibilities?

We believe it is because sales tax is not a tax imposed on the business itself; as such, there is limited knowledge of the responsibility.

Income tax, business licenses, franchise tax and property tax are all taxes imposed on the business. Everyone naturally understands and accepts this reality. However, sales tax is imposed on a business’s customer – not the business itself. The business serves only as a tax collection agent for the government. For most business owners, adding government imposed sales tax collection to their “to do” list seems absurd.

Unfortunately, if a business fails to collect what is due to the government from their customers, the government will go after the business itself for the tax revenues. An audit ALWAYS gets the attention of a business that never previously considered their sales tax responsibilities.

We can’t begin to communicate with all the small and medium sized businesses in the country about this sales tax responsibility and risk, but we can reach the majority of the CPA firms that serve these businesses. We encourage all CPAs to educate their clients that sales tax represents as much or more risk than income tax. The larger CPA firms have significant tax staff that specialize in sales tax – primarily focused on serving the Fortune 500. The smaller and regional CPA firms that don’t have these comprehensive SALT practices can partner with TaxConnex to provide sales tax consulting and compliance services to their clients.