What To Do When Your Business Sales Are Exploding
Michael J. Fleming is the founder and president of Sales Tax and More, a full-service consulting and solutions firm with a passion for state tax. He is one of the country's leading authorities on sales tax issues such as consulting and research, registrations, returns, nexus, drop-shipping, eCommerce, and service providers.
Michael is a renowned writer and speaker, and he regularly presents on webinars. He is also the host of the Sales Tax and More Podcast, where he shares his wisdom and learnings with his audience in order to help them navigate the tricky world of taxes.
In this episode…
Mike Fleming and Ellie Moffat discuss what to do when your business sales are exploding!
Here’s a glimpse of what you’ll learn:
What the first thing you should do when you find yourself buried in sales
Common Pitfalls
How to approach your sales tax strategy
Where you can find helpful resources
Connect with Michael
Episode Transcript - Audio Version
[00:00:00] Intro: Welcome to Sales Tax and More, your go to resource for all things state tax related. Now, here is your host, Michael Fleming.
Okay. Mike Fleming here, founder of Sales Tax and More, and today's co host of the sales tax and more podcast, where we talk about everyone's favorite topic, which is of course, sales tax. And, today we're going to be talking about what to do when your business is exploding.
We've had a number of clients who over the years have appeared on Shark Tank and virtually overnight, their business have exploded more recently. We're seeing a lot of people who are catching Tik Tok trends and their business is exploding. [00:01:00] No matter what the reason is, if your business exploding, we're going to talk about some of the, the different topics you need to consider today.
But first let me introduce you to my co host Ellie Moffitt. Hey, everyone. Great to be here. And Mike, I'm really excited for this topic today. I think it can potentially be helpful to a lot of people out there. But for those who don't know us, if it's your first time here, we're Sales Tax and More. Sales Tax and More is a full service consulting and solutions firm.
We have a really great team here of experienced tax professionals who are very dedicated to fulfilling any of your state tax or related needs. So we do a lot of sales tax returns, sales tax registrations, Consultations, research, and like our name states, more. So if you have questions, about your sales tax needs, if you'd like to work with us, please reach out.
We'd love to work with you too. So, Mike, we have seen, like you said, businesses explode. What would you say is the first [00:02:00] thing a business should do if they find themselves just suddenly buried in sales more than they know what to do with? Oh, before we do, I just want to comment. That's why we're sales tax and more rather than sales tax and consultations.
So more is a lot easier to say than in consultations, especially if you're stringing them all together. So, thank you, for introducing the company there. And, I reserved the right to pick on you a little bit. I'm sorry. But, yeah, what, what should businesses look at first? Well, I think the first thing you need to do is figure out.
What's your business model is, for example, if you're selling, through Tik Tok itself, and that's your only. Business channel. Well, Tik Tok is considered a marketplace just like Amazon and they are the ones that are responsible for collecting and remitting your tax. So you really don't have to do anything at that point.
However, if you're [00:03:00] using Tik Tok to drive people to your website or another website, then. There are some things that you may have to do. So the first thing is, what's your business model? You know, are you selling on a marketplace or are you selling through your, your own website? Does that make sense, Ellie?
Yeah, it does. Thank you, Mike. So when people are here, what would you say are common pitfalls you see for a business that's experiencing this? Well, businesses that are growing rapidly, the biggest pitfall I see is them procrastinating because before you hit thresholds or before you have a link or connection with a state that we call nexus, you don't have any exposure whatsoever.
But as your sales start to explode, you start hitting these, thresholds fairly quickly. Some of them are based on 100, 000. Some of them are based on as little as [00:04:00] 200 transactions. So once you cross that threshold, in theory, you're supposed to be collecting tax right away. So if you wait until the end of the year or two years or three years, all of a sudden you've got all of this exposure.
Whereas if you had addressed it right away, then, you, you don't have any exposure. All the money comes out of your customer's pocket rather than coming out of your pocket with the added insult, of penalty and interest. Because if you don't collect the tax, the state says, Oh, that's okay. You didn't know that you were supposed to collect the tax.
They're going to say, sorry, too bad. So sad. And now, because you didn't collect the tax, you have to pay the tax. Plus the added insult of penalty and interest. So that's one of the biggest pitfalls I see. Now, more recently, what we've seen, is, you know, a couple of companies [00:05:00] exploding on TikTok and they're driving people to their own website and they have the best of intentions.
They know they should potentially be collecting sales tax. So they turn the sales tax collection on, but they don't get registered and you can't just collect sales tax. You have to get permission from a state, which comes in the form of a registration in order to collect their sales tax and remit it. So tax collected, not remitted, which is what these companies were doing.
They were collecting the tax, but not turning it in anywhere. We call that the cardinal sin of sales tax. And in some instances, can result in criminal penalties. In the worst cases, and, you know, generally, it's not going to be in these cases, more often than not, it's someone who's trying to hide their income, can result in actual jail time, but, in cases like this, we have civil penalties and interest, and we have criminal penalties and interest.
Criminal [00:06:00] penalties and interest are just a lot more money. And that can happen if you're collecting and not remitting the tax. So, okay, so for these businesses, what should they do? How should they approach their sales tax strategy? What, can you give us some direction there? Yeah, absolutely. You have to know what your nexus footprint is.
Or you have to know what nexus is. So if you're on this podcast today, that's a positive step. As we said, nexus just means a link or a connection. We've got a free, chart up on our website. It tells you the thresholds for every state. It's, tells you, whether there's a transaction threshold.
It tells you if there's a dollar threshold and what those are. It tells you what's included in those thresholds. So that's a great tool. So you can do this on your own or you can hire someone like us to do. We have a service. It's called a data review where we review all of your [00:07:00] sales data for the last year plus year to date.
And then we'll tell you, hey, you've crossed these thresholds and where you need to register. But again, you can do that yourself. We have the tools available for you to do it. So that's the first thing you need to do. Where do you potentially have a responsibility to be collecting tax? And you want to do that sooner rather than later, because, yes, while compliance does have a cost, you know, having, The ability to collect tax and then remit the tax to the state, whether you do it yourself or whether you hire someone like us to do it, there's a cost involved.
But that cost pales in comparison to the amount of money that's going to come out of your pocket, the back tax, that penalty and interest, if you're not doing this. Especially the longer you let it go, the bigger that number becomes. So that's the first thing you need to do is, is figure out where you need to be collecting [00:08:00] tax.
Now, another thing is, it's not just where you have nexus because nexus is not taxability. Nexus just means you have a link or connection with the state where you may have to collect the tax. Maybe what you're selling is not taxable. In most instances that I've seen, tax is, going to be, needed to be collected.
In most, if not all states, you know, candy is taxable in a lot of states. I see companies selling candy, but in some states it's not going to be taxable. So you don't need to get registered in a state just because you have nexus. It needs to be, you have nexus. This link or connection and what you're selling is taxable.
And when those two things come together, then you should take the steps to get registered. Now, again, you can go and do that on your own, or you can hire someone like us to go out and get you registered. Once you're registered, you're going to need to file the sales taxes. Again, that's something that you can [00:09:00] do on your own.
Or you can hire someone like us to go and file, make sure that everything is done correctly. And hey, to be real honest, most people you're good at going out and making sure that this trend is going to continue, that you're continuing to drive the marketing and the sales of this company, So a lot of people choose to outsource, the sales tax.
Doesn't have to be to, to us. There are other companies like us out there, but we'd prefer if you come to us. We would prefer if you came to us. We like our service and we like our team and we think they do a really great job. So, Mike. Where can people turn for helpful resources if they're just getting started, if they just need to get their eyes on a few more things, where can they turn for some helpful resources?
I, you know, perhaps I'm prejudiced here, but, I think our website is a great place. [00:10:00] It's free. Number one, we have a ton of webinars. We offer them live. We've got a number of recorded webinars out on, YouTube. We have other podcasts out there. We have a lot of written materials. So we have a whole lot of resources that are available for people who want to learn more about this.
And once you get as far as you can on your own, maybe you need a consultation. Maybe you'd like to sit down with me personally and, remotely. I usually, am not traveling out to sit down with you at the local, candy shop, but, we, we do it remotely. We do it on a call, a zoom call like this, and I can answer whatever questions generally.
Some questions. Don't suit themselves for a consultation, but most of the time I'm going to be able to give you a lot of information, fill in the blanks, and tell you where you need to go, from there. And, and the cost for a [00:11:00] consultation like that is 495. So, yes, it may seem like a lot of money. A lot of people get all of this just from our free resources, but some people need a little bit more handholding.
If you actually get everything down. You know, then you can reach out to Ellie or member of our sales team, and they can help walk you through the process and in some of the next steps. But again, whether or not you decide to use our services, our resources are always going to be complimentary to you.
They're always going to be out on the website, out on social media, YouTube and the other podcasting channels. And we're always adding. To those resources. Thank you so much, Mike. And if you have other sales tax needs, like we've just been saying, we have a lot of solutions and services. You can reach out to me directly as well.
My email is E Moffat that's E M O F F A T at sales tax [00:12:00] and more. com. Or you can get on our website sales tax and more. com to explore some of the stuff we've been talking about today. And we've really enjoyed having you here. So if you've enjoyed it as well, please, please like, please subscribe and share it with all your friends.
So thank you so much for joining us. Thank you everyone. Hope to see you on the next episode of the Sales Tax and More podcast. Have a great day. Bye bye.