MFA Bring Personal Liability to Many Small Business Owners

The penalties for sales tax noncompliance tend to be the most onerous of all tax penalties and in most states, a company that fails to collect sales tax can be held liable for the unpaid sales tax. To make matters worse, states can hold a company's "Responsible Person(s)" personally liable for any unpaid sales tax liabilities. In other words, a state can "pierce the corporate veil" and go after personal assets of company owners and employees in order to collect unpaid sales tax owed by our companies. Unlike Walmart, Amazon.com, Best Buy, Home Depot and other big retailers, we do not have have armies of accountants and tax attorneys to deal with costly and time-consuming audits from every state. One innocent mistake could put us out of businesses and even lead to personal bankruptcy.

In most states, a company that fails to collect sales tax when required can be held jointly liable with the consumer for the unpaid sales tax. For example, a company that is required but fails to collect $300,000 in sales tax on Internet purchases can be assessed and held liable for the $300,000 plus penalties and interest. Assuming the company's failure to collect the sales tax goes back three years, the total liability could easily be in excess of $2,000,000 including interest and penalties.

To make matters worse, states can hold a company's "Responsible Person(s)" personally liable for any unpaid sales tax liabilities of the company. In other words, a state can "pierce the corporate veil" and go after the personal assets of a Responsible Person in order to collect unpaid sales tax owed by a company. A "Responsible Person" can be a single person or any combination of an owner, officers, or employee of a company that has direct or indirect oversight of collection and remittance of sales tax.

Read the full article on personal liability for business owners and employees here.