You’d think that owning a business would release you from any personal liability when it comes to your business taxes. After all, the entity is responsible for handling all that tax stuff, right?
Unfortunately, when it comes to paying sales taxes, you, as a business owner, can be held personally liable if your company fails to remit sales taxes to your state. That means the state can take money and assets from your personal accounts as payment if it determines that your company failed to pay sales tax.
This doesn’t apply just to business owners. Any officer, director, or employee who holds a position requiring them to follow sales tax law requirements in a corporation or LLC can be held personally liable for sales tax collected or needs to be collected. Even partners who have minimal or no involvement in your business’s day-to-day operations can be held personally responsible.
HOW DOES PERSONAL RESPONSIBILITY WORK?
When it comes to sales tax, personal responsibility simply means that an entity’s officer can be held accountable for the business’s failure to pay sales tax to the IRS. More than one person can be considered a responsible person.
As a responsible person, your personal assets can be taken if your entity is found to have withheld sales tax revenue from the state. That includes everything from your personal finances to your house and any other assets that the state can take. If you’re facing a sales tax audit, it’s essential to consult with an attorney as quickly as possible so that you can keep your personal assets.
BUT WHAT IF I DIDN’T KNOW THE SALES TAX LAWS FOR MY STATE?
Unfortunately, being ignorant of your state’s sales tax laws is not an excuse for getting out of hot water with the state. They assume that business owners, partners, and other responsible parties know the tax laws and consequences in their state.
DO I NEED TO PAY SALES TAXES ON A CLOSED BUSINESS?
Any business that closes needs to pay taxes for the last year that it was in operation. If you closed up shop without paying sales tax, you’re still liable. In fact, many states will start aggressively pursuing business owners, partners, managers, and other responsible parties when they see a business shut down or go bankrupt.
There’s no statute of limitations on collecting sales tax, so you’ll be hounded by the state’s department of revenue for as long as it takes them to resolve your case.
HELP! I’M GETTING AUDITED!
First of all, calm down. It’s normal for businesses to get selected for a sales tax audit.
Secondly, now’s the time to consult with an attorney that specializes in tax law. Regardless of whether you think you have been compliant with sales tax laws, it’s incredibly important to have an attorney on your side who can sort through all the legal stuff and make sure you’re not held personally liable unnecessarily.
Contact us today for a free consultation to learn more about your options if you’re about to go through a sales tax audit or have other concerns related to sales tax laws.