In a LinkedIn discussion about paying use tax, one commenter replied that sometimes the higher-ups in a company get in the way of paying use tax. They don’t understand what use tax is, why the company needs to pay it, and what negative impacts not paying has on the company. Instead, they see the use tax as an unnecessary expense that cuts into profits and the overall bottom line. As the sales tax practitioner in your company, you know that sales tax is only one side of the coin and that use tax needs to be paid. But how can you convince your bosses that the company really needs to pay use tax? If you’re not completely up to date on what use tax means, be sure to go read our article on use tax to get your bearings.
The employee who brings problems to the boss is never on the Favorite Employee list. That is unfair in many ways because knowing what the problems are is important. Still, it’s much better to bring your boss a solution that a problem. Keeping that in mind, when you approach your boss about paying use tax, you need to frame it in how it impacts results positively. In most instances, paying use tax is a security measure because it is the law. When your company pays use tax, they’re avoiding being audited and being slapped with fines and penalties. Paying use tax prevents the company from being shut down because of nonpayment. But to your boss, paying use tax doesn’t seem like a security blanket to them but rather an undue burden that can be avoided.
The result they see is a reduction in profits. Instead, show your boss what will happen if you don’t pay use tax. Run a report that shows just how much use tax the business had over the last year and do some math behind what kind of penalties the company might have to pay if you don’t pay. Compare that number to the amount of profit you see in sales. In many cases, the amount of penalties is higher than what the company makes in profits. Take those numbers to your bosses and show them what not paying use tax will cost. If your bosses point out that your scenario will only happen if they get caught, be sure to underline the fact that states are looking towards a use tax as a means to recoup missing sales tax because of low revenues.
The more we buy online where sales tax isn’t collected, the more states will go after businesses for use tax. With any luck, your boss will be happy that you pulled the company’s chestnuts out of the fire — not ready to shoot the messenger.