When you’re just getting your business off the ground—or even if you’ve been operating for a while—it can be tempting to “skip” certain administrative tasks that seem like red tape. One of the most commonly overlooked (or misunderstood) responsibilities? Sales tax.
It might feel like a harmless shortcut at first, but dodging sales tax obligations can trigger a real nightmare later on. Here’s why you should take sales tax seriously, before it comes back to haunt your business.
1. Sales Tax Isn’t Optional—It’s the Law
Sales tax isn’t a “nice-to-have” or a courtesy for your customers. If your products or services are taxable in your state (or any state where you have nexus), then collecting and remitting sales tax is a legal requirement. Failing to do so can lead to audits, fines, and serious penalties.
Think of it this way: skipping sales tax is essentially keeping money that doesn’t belong to you. That adds up quickly in the eyes of the law—and the consequences can be steep.
2. Audits Can Reach Way Back
Many state departments of revenue have the ability to audit up to seven years back—or even more if they find signs of fraud or willful neglect. That means you’re not off the hook just because time has passed. If you skipped sales tax collections early on, you could be hit with a huge bill for past-due taxes, interest, and penalties years after the fact.
3. You May Owe Tax in Multiple States
Thanks to the Wayfair v. South Dakota Supreme Court decision in 2018, businesses can now be required to collect and remit sales tax in states where they have economic nexus—not just physical presence. That means if you sell online or across state lines, your obligations might be broader than you think.
Skipping sales tax because you didn’t physically operate in a certain state? That won’t hold up in an audit.
4. It Damages Customer Trust
Ever notice how legitimate e-commerce websites clearly show tax calculations during checkout? It’s a sign of professionalism and transparency. Not charging sales tax where applicable can not only get you in trouble with the state—it can also erode trust with your customers once they find out.
Nobody likes surprise bills or tax letters down the line. Doing things by the book protects both your business and your reputation.
5. Fixing It Later Is Way Harder Than Doing It Right the First Time
Backtracking to fix uncollected sales tax is a complex, expensive, and often stressful process. You’ll need to determine what you owe, calculate interest, possibly pay penalties, and amend your financial statements. Depending on how far back it goes, you might even need professional help from an accountant or tax attorney.
Bottom line: prevention is far cheaper than the cure.
What You Can Do Now
If you think you might have skipped or misunderstood your sales tax obligations, don’t panic—but don’t wait. Here’s what to do:
- Determine where you have nexus (physical and economic).
- Research state-specific tax rules for your industry.
- Register for sales tax permits in applicable states.
- Start collecting and remitting properly—going forward, and possibly retroactively if needed.
- Consult a professional if you’re unsure how to get compliant.
Final Thoughts
Sales tax may seem like a tedious task—but ignoring it can haunt your business for years. Getting ahead of the issue now can save you thousands (or more) and protect the future of everything you’ve worked hard to build.
So don’t let sales tax skeletons hide in your business closet. Shine a light on them now—before the ghosts of unpaid taxes come knocking.
Interested in a no-obligation free consultation? Schedule a time with us here :
https://yellowbrickfinancials.hbportal.co/schedule/663165633aaf34001f4c93c2
