Michael J. Fleming | Finding Your People and Navigating Sales Tax During Uncertain Times

Michael J. Fleming is the Founder of Sales Tax and More, a full service consulting and solutions firm with a passion for state tax. Although he is based in Texas, Michael serves all the 50 US States, and he also serves Canada and Puerto Rico. He has many years of experience working for a prominent firm handling state tax issues and is considered one of the country’s leading authorities on the topic and is an expert when it comes to Nexus, e-commerce, drop shipping, and service providers. Michael started Sales Tax and More with the goal of creating something different by providing flexibility, creativity, personalized service, accountability, and a commitment to education. 

In this episode, Julie Musgrave, guest host of the Smart Business Revolution podcast is joined by Michael J. Fleming where they talk about sales tax, the Wayfair decision and its impact on Michael’s business, effects of COVID-19 on businesses, and how working from home could create a nexus.

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Here’s a Glimpse of What You’ll Learn:

  • Why Michael Fleming started Sales Tax and More.
  • How the Wayfair decision impacted sales tax and Michael’s business.
  • Michael’s advice to startup companies experiencing rapid growth.
  • What Michael looks for when he’s hiring someone and how he addresses mistakes that’s made in the hiring process.
  • How can a new company find its niche and position itself as an expert in its industry?
  • How businesses should manage their finances and taxes during the current COVID-19 health crisis.
  • Michael‘s thoughts on what people should do with the relief checks they receive from the government.
  • How working from home can create a nexus and what companies should do about it.
  • What businesses need to look out for coming out of the COVID-19 crisis.
  • Where to learn more about Michael J. Fleming and Sales Tax and More.

Resources Mentioned:

Sponsor: Rise25

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Episode Transcript

Intro  0:14  

Welcome to the Revolution, the Smart Business Revolution podcast where we ask today’s most successful entrepreneurs to share the tools and strategies they use to build relationships and connections to grow their revenue. Now, your host for the revolution. John Corcoran.

 

Julie Musgrave  0:40  

Hi there. I’m Julie Musgrave guest host of Smart Business Revolution podcast where we talk with CEOs, founders and entrepreneurs of companies and organizations like YPO, EO, Activision Blizzard, Lending tree, Open Table, xsoftware, and many more. Our guest today is Michael Fleming, the Founder of Sales Tax and More, a consulting and solutions firm specializing in state and local taxes based in Texas. Mike is recognized as one of the country’s leading thought leaders when it comes to Nexus e commerce, drop shipping and service providers. We’re going to hear his great advice about small business and those tax dollars. Plus, we’ll touch on some COVID related tax issues you will want to know about. Before we get into this interview. This episode is brought to you by rise25 media, we don’t need to tell you that the world has changed. We all know that. The next question is what to do about it. And in this economy, it’s more important than ever to be able to connect and build strong relationships even when you can’t be face to face. At rise25 we have 20 years of experience in the b2b space connecting and building profitable relationships with clients, referral partners and strategic partners using a podcast. We’ve helped hundreds of b2b businesses get more clients and referrals and land collapse. With dream clients, Learn more at rise25 Media calm or email us at support at rise25media.com. 

And now onto our show. Michael Fleming is the Founder of Sales Tax and More a full service consulting and solutions firm with a passion for state tax. While he’s based in Texas, Mike still serves all 50 States, Canada and Puerto Rico. He has years of experience working for a prominent firm in a run of state tax issues, and is considered one of the country’s leading authorities on the topic. Mike started Sales Tax and More with the goal of creating something different providing flexibility, creativity, personalized service, accountability, and a commitment to education. He’s going to educate us today on some issues that can help your business grow as well. So we are looking forward to it. Mike, thanks so much for joining us.

 

Mike Fleming  2:55  

Thanks, Julie. Thanks for the opportunity to be with you today.

 

Julie Musgrave  2:59  

I know we’re going to get into a lot of good stuff here. So let’s talk, though about your start. Clearly you have a passion for taxes, what made you want to launch Sales Tax and More?

 

Mike Fleming  3:12  

You know, sales taxes. You know, no one ever, I think says When I grow up, I want to be in sales tax. So something that sort of fell into and you know, I worked as a director with a great firm for many, many years. But they weren’t great at making partners. And I decided that if I’m going to put this much time and effort and energy into it, I want to have more creative control over what the firm does. And I want it to be working for myself. So two things there. i decided to step out on my own two years ago last month. And if you’re in the sales tax business, my timing could not have been better. Better, I thought, you know, we get a nice slow start. But the Wayfair decision happened within two months of us opening our doors and we went from two employees up to 18 employees almost overnight. So can you

 

Julie Musgrave  4:14  

give a little background on the Wayfair decision? I know that was a big issue going on.

 

Mike Fleming  4:20  

Yeah, absolutely. And, you know, we use a term in the industry called Nexus. And Nexus is just a fancy word that means link or connection. And it’s the link or connection that has to be present with the state before the state can require you to collect and remit its taxes. Prior to the Wayfair case, which was decided on June 21, of 2018. There had to be some sort of physical component. So you know, if you had a physical presence in a state then you are required to collect and remit taxes on all of that one out the window when we The Wayfair case because the Wayfair case, the US Supreme Court stepped in and said, You know what, we made a mistake. All of these previous cases where we said you needed a physical presence, we never should have introduced that it doesn’t say that anywhere in the Constitution. So now just making sales into a state or just making a certain number of transactions into a state can give you enough of a connection, so that a state can now say that you have a requirement to collect and remit their taxes. So it literally stood the entire tax world on its head.

 

Julie Musgrave 5:38  

So you timed it pretty well. You said?

 

Mike Fleming  5:41  

I said better lucky than smart. So I did not know that was coming.

 

Julie Musgrave  5:47  

Right. But what was it like to kind of step away from something that was already established and then just go off on your own?

 

Mike Fleming  5:55  

Well, it was, it was a little bit scary. And I told my wife that You know, we’ll probably have to wait six months or so before we can start, you know, making some decent money. You know, unfortunately, or fortunately, I planned on hiring one or two people and you know, just having a nice little consulting practice and start putting policies and procedures in place and building out the processes in building it slowly. What I didn’t realize is that once I made this announcement, you know, fortunately, I got a good reputation out there in the industry, and people started calling me on day number one, so I never had that slow start. I never had the time to put the policies and procedures in place and that’s a really great feeling. When people you know, on day number one, you have more businesses and you can handle the downside. He is trying to struggle to get two people in place. While you’re actually doing the work, but you know, it’s a great feeling to see that people care enough about the way that you do business that you’re getting that type of growth. And this is well before the Wayfair decision, you know, two months before that.

 

Julie Musgrave  7:19  

So what did you learn from being kind of sounds like a little over your head, but you came out successfully. So what advice would you give to someone who maybe wasn’t expecting the big burst right at the beginning,

 

Mike Fleming  7:30  

start hiring before you need people, because it’s really tough to train people while you’re in the middle of things. I mean, you want to be training people year round. If you’re trying to train them at the peak of when you need them. It actually slows down the process. And the other thing is, be smart. When you’re hiring. Make sure that someone just doesn’t have the skills, but they’re going to be a good fit into The culture of the company or what you’re looking to build, you know, I’ve learned very quickly that, you know, no matter how good someone is, if they’re going to be disruptive in the firm with everyone else, if they don’t fit in, well, you know, no one person is that important. And it’s the team that we really have to look out for the most because they’re going to get the majority of the work done. The team, so everyone’s got to be, you know, not only work well, with me, with the team also. So we now rely on the team to actually be involved in the interviewing process, and everyone gets feedback. Now, not everyone at the firm, but we have three, four or five people that they’re going to be interacting with. As part of the interviewing process. You know, we do a group interview here and we listen to the feedback you have, you know the people who are going to be working with these applicants?

 

Julie Musgrave  9:07  

So how do you find those right people? What kind of questions do you ask when you’re going through the interview process? When you’re looking at resumes? Obviously, what qualified people but as you mentioned, you want someone that fits in with the team, what do you look for

 

Mike Fleming  9:19  

For me, and it’s a little bit of a gut feeling. So I don’t have any set questions that I asked. I just want them talking about themselves. So for example, I’ll say, you know, I can see your resume, you know, I can see the cover letter you’ve written, you know, what can you tell me about yourself that, I wouldn’t know, just by looking at your resume and you know, it can be business can be personal. So a lot comes out when someone’s talking about themselves and you just get a good feel for the person that and you know, you get a feel for Okay, yeah, this is someone I’d like to work with. When you ask him business type questions and you know, they usually have the standard answers and you know, some people are professionally viewed and some of them are going to slip through the cracks. But when we’re, we’re asking them to just tell us something about themselves. You can see through who they are into who they really are, or at least a better glance. I mean, when it comes right down to it, sometimes we don’t know until we actually hired them. But we weed out a lot of people in this informal type question.

 

Julie Musgrave 10:36  

Have you ever gotten it wrong?

 

Mike Fleming 10:39  

Of course,

 

Julie Musgrave 10:39  

What did you do? How did you fix it?

 

Mike Fleming  10:42  

Um, some questions. You know, sometimes not questions, but some scenarios. I think this is really important too. If you make a mistake. You got to act on that quicker rather than later. Anytime I’ve waited anytime I am given I’m going to change to come around or, or fit into the program. It’s just gotten worse, it’s never gotten better. So I’ve learned to correct my mistakes as quickly as possible. I had this one woman, we hired her as a marketer. And she came in and said, Everything sounded great. But she was still working for another company, so she let me know. And then tried to get the other company to hire me. Me to hire other companies. So I hired her to do this work. I didn’t hire her to tell me to hire her former company. So she was like, oh, that afternoon.

 

Julie Musgrave  11:44  

And that’s tricky, though. It can be complicated. And it’s kind of hard to lay out what your expectations are when you don’t see that kind of thing coming. Right?

 

Mike Fleming  11:52  

Yeah, absolutely. And in our second choice is a star. She’s absolutely wonderful. Sometimes things happen for a specific reason. I mean, you know, I don’t like letting people go on their first day, but I realized I had made a mistake. And I am so happy. It’s Ellie, you’ve, you’ve spoken to Ellie. So she is absolutely wonderful. I couldn’t ask better for better employees. So sometimes, again, I use this term better lucky than smart

 

Julie Musgrave  12:28  

and good for it. The other person, that’s kind of a good lesson to learn when you’re on the trying to get hired side is that things will work out. And even if you hear it for the first time, then maybe it’s still coming to happen. Right?

 

Mike Fleming  12:41  

Absolutely.

 

Julie Musgrave  12:42  

I love that. Well, what about some advice for I know you, you’re working for someone else you started off on your own? What about how do you go about finding that one thing that is going to set your business apart when you’re starting from scratch? You got to find your little niche. What’s your advice for that?

 

Mike Fleming  13:00  

Well, even when you’re working at a CPA firm, you have to distinguish yourself from your peers. And one of the things that I thought was the wave of the future was ecommerce. And you know, most of the people at the firm were like, I’ve been ecommerce never gonna be a big thing, you know. And we all know how big e commerce is. Now. So I started talking about sales tax to different ecommerce sellers, and it fell on deaf ears for years and years. And, you know, I just kept telling people at some point, this is going to be a big issue and here’s what you got to look out for. And over the years, it became a bigger issue and because I was out there first and because I was out there talking about this the longest because I had a real passion for it. All of a sudden, I started getting called to speak at this event, and that event and avalara asked me to write their first white paper on, you know how sales tax can impact Amazon sellers. And so find something that is different that other people aren’t doing. And then you see a need for people to be talking about it. And you know, you don’t have to be the only person out there. But you’ve got to learn as much as you can. And you’ve got to position yourself as a thought leader or, or as an expert, when it comes to what you’re talking about.

 

Julie Musgrave  14:38  

I’m sure that gives a peace of mind for your customers, as well.

 

Mike Fleming  14:42  

Absolutely. And that’s one of the reasons when I went out on my own. I had that to fall back on I had already created all of that while I was working for someone else, and I just moved it

 

Unknown Speaker  14:54  

to my own name.

 

Julie Musgrave  14:56  

Yeah, easy transition. Let’s not talk a little shop Cove It Okay, it’s on all of our minds to thrown a real wrench into some business plans for this year. Right. So what is the first thing that we should be thinking about when it comes to managing the financial stress that a lot of us are under?

 

Mike Fleming  15:12  

Okay, so one of the biggest questions we get is, you know, all of these states are putting out language about extensions. And, you know, we’ve got some great information out on the website, one of the blog posts I did was not all extensions are created equal. For example, income tax, that is always your money. And, you know, most states are putting it off until at least July 15. They’re following the IRS. We’re starting to see some that may put it off even further. And because that’s your money, if you need to fund your business, then use that money. I mean, you may get a slap on the wrist if you don’t pay it on time, you know, pay some penalty and interest but right now, the stakes are really being pretty, pretty gentle. sales tax on the other hand, that’s what we call a trust tax. In other words, it’s not your money. It’s either the customers money or the state’s money. So you’re just collecting it in trust. And unfortunately, many states have statutes that say it’s a crime, to utilize sales tax money in your own business. So when these states are saying you’ve got extra time to file your sales tax returns, it’s because you’re working from home and you may not be able to get all the data together. You know, some people have bad internet connections and it’s more for the mechanics. It’s not because they’re saying, Hey, you know, you can utilize this money in your business except for governor Newsom in California. He actually came out and said that he said Take a one year loan with no penalty and interest. Here’s the problem with that. I mean, if I fund my business with credit cards, and my business fails, then I can walk away. I can file bankruptcy, I, you know, personal or business. But with sales tax, you can’t do that; it was never your money. So if you don’t pay that back to the state, the states basically look at that as stealing or fraud. And they’re the biggest sin in sales tax is tax collected, not remitted. So the governor of California hasn’t said we’re taking away the personal responsibility. He hasn’t said that we’re taking away any of the criminal liability. So as bad as things are, you know, if you have to use sales tax money to fund your business, they can get worse. Because, you know, if your business fails and you don’t have the money to pay back that sales tax. They’re going to Pursue. Yeah. And these are the types of taxes that survive both business and personal bankruptcies. So it’s, you know, it’s true, you know, I think the governor’s heart is in the right place, but I just think he doesn’t understand sales tax. In these states, they’re going to get pretty aggressive. Once we stop talking about the virus. Once we start talking about the economy again. The nice guy attitude is going out the window, right?

 

Julie Musgrave  18:30  

So how should we use these extensions?

 

Mike Fleming  18:34  

with our clients on the sales tax side? They are telling us even if, you know, sometimes you need to file on a monthly basis, sometimes you need to file on a quarterly basis. So they’re telling us I don’t want to keep the money here for three months. You know, can you hold the money for me? In other words, when I send the money to you for this month, I want to include all of the sales tax we collected because Out of sight out of mind, if I keep it here, as my business is getting tougher, I may be tempted to use it. So the extensions for sales tax, you know, are not so that you don’t have to pay today. It’s so that you have time, for example, we’re dealing with a gentleman this morning. And every time he tries to gather his data, his internet crashes, so he’s having a real problem, getting us the data so that we can file on time. Now, normally, you know, you’re one day past the 20th of the month, and you’re getting hit with all sorts of penalties and interest, you know, in a lot of states. So, you know, for sales tax, that’s what this is meant for. It’s meant so that if someone has a hard time getting all of their data together, and sometimes it’s not available early in the month, you only have a short window to get all of that data together. So That’s what an extension along those lines now, again, an extension for income tax. That’s a whole nother story. I mean, you know, if you need to use the money to tide your business over, that’s your money. What you choose to do with it is up to you now you’re going to have to pay that income tax at some point. But if you if it comes to the point where you need to use tax money to fund your business, the income tax money is that you want to use it’s just important to remember that distinction.

 

Unknown Speaker  20:33  

Absolutely difference between the two

 

Julie Musgrave  20:34  

kind of along those same lines. What about those reliefs? relief checks? How should we be using those? What do we need to know?

 

Mike Fleming  20:45  

you know, really that’s personal. I mean, how long is this downturn going to last? I mean, in the big scheme of things, the relief checks are not a lot of money. 1200 dollars per person. You know, what’s your rent? What’s yours? What are those things that you know you need to pay on a daily basis. I mean, you got a lot of money and you want to go out and buy TV with it with your stimulus check then okay. But I think that we need to be saving it because we just don’t know how long it’s going to take for the economy to come back. So, in today’s consumption, economy, very little saving is going on. Put that money aside, save it for a rainy day is what I would do with it.

That’s just my opinion, there is no right or wrong with what you can do with it. Now I will say something. I want to go back to COVID-19 because so many of us are working from home at this point and This link or connection that we’re talking about, can be created by telecommuting employees. So if you’re working from home, in theory, the states could say, hey, you’ve got a requirement to collect and remit these taxes. Now most of the states during the nice guy face, so they’re saying, so long as there’s a crisis going on, we’re not going to hold this against you. We’re going to temporarily suspend this. But companies like Twitter, they’ve just said that they have given all of their employees the option of working from home going forward. Now, if you’re a company that’s thinking that way, a lot of companies are realizing that their employees are actually more efficient when they’re working from home. There could be ramifications to that. So if once we are through this crisis, the states most And we’re going to start saying, Okay, now we’re going to start enforcing this again. So if you have people who live in our state and they’re working from home, then that’s going to create this link or connection. And you now have to worry about payroll taxes, you now have to worry about sales taxes, you now have to worry about income taxes. So that’s something just to keep in mind as you’re deciding whether or not you want to let your employees continue to work from home once this is over.

 

Julie Musgrave  23:28  

Yeah, I mean, and kind of thinking about that, what do you see the market doing going forward? I mean, there are going to be a lot more companies that are working from home, it’s going to get trickier trying to figure out your sales tax situation. So what do you see happening?

 

Mike Fleming  23:45  

Um, well, the first thing is, I think the states are going to be very, very aggressive. whenever they’re coming out of recession, states increase their enforcement. Their collection activities. So I think it’s going to be a pretty tough environment for all companies. And they know that people have people working from home, and they’re going to be looking for these types of activities. So I think that we need to reach out and figure out what can create these activities for us, either through you know, sales tax specialists, like ourselves or through your CPA, you know, or someone who can help guide you through this or investigate it yourself. I think that knowledge is very, very important as we move forward, because, you know, it’s like TV, ignorance is no excuse for the law. And, you know, a lot of people you know, are going to say, Well, I just didn’t know, well, the states don’t care that you just didn’t know. So We need to educate ourselves. Do we have any potential exposure? And if we do, what steps do we need to take in order to mitigate it? So there are lots of free webinars out there, we do at least two, three free webinars a week to go over some of these topics where people can see if they have potential exposure or not. A lot of times, we have people call us up, they’re all worked up because they hear all these horror stories, things that could happen and, and none of them apply to them. The exact opposite is true. Also, some people think that none of it applies to them. And a lot of it does. So educating yourself is the most Paramount thing. the thing to do at this point.

 

Julie Musgrave  25:49  

Well, thank goodness we have folks like you to help educate us and help us kind of navigate running these businesses. It is kind of a stressful time as you’ve mentioned, So what is the biggest area that you think we just need to keep our eyes on the prize and navigate this whole situation for the long term?

 

Mike Fleming  26:13  

I think we need to look at what the changes are, because a lot of states are going to be changing a lot of things. Another thing that happens when you’re coming out of recessions, is states are looking to increase their tax base. So maybe, you know, services that they never taxed before, all of a sudden they’re going to start taxing the last big recession back in, you know, 2008 2009 states started looking at resale certificates very heavily, whereas they weren’t a big issue before that. They became a huge issue after that. So we’ve got to be, you know, attentive to what changes are being made out there. And then the second thing is, you know, the state is still in a nice guy mode. Are they still Talking about the virus? And so long as we’re talking about the virus, you know, the states are not going to go into their aggressive mean guy stage. But once we start talking about the economy again, you gotta realize, you know, states like California saying, We’re $45 billion in the whole,

 

Unknown Speaker  27:20  

you know, they haven’t had any

 

Mike Fleming  27:23  

revenues coming in or greatly reduced revenues coming in. So they’ve got to make up for all of that last time. So there’s only so long they can be the nice guy. So you got to look for that switch. When are they changing from being the nice guys and allowing everyone to extend that with no penalties and no interest? And when are they going to say, Okay, I want the last seven years worth of back taxes because I found you and I know that you’ve had this link or connection for the last seven years and now you owe me all of that back tax plus penalty and interest and unfortunately, the state We’re going to make examples of people, and we’re going to be hearing about it, you know. So that’s why it’s important to know what our responsibilities are. Because the states have a lot of powers and they can make your life miserable. They can put you out of business. That’s how onerous the penalties and interest are. I mean, if you’re looking at, you know, tax rates of eight 9% in some states, and then penalties and interest to 50% or more on top of that, over, you know, seven 8-10 year periods. That’s not a situation you want to find yourself in now.

 

Julie Musgrave  28:38  

get ahead of it. learn the ropes. Mike, this has been so informative, we certainly appreciate it. I’m going to be looking out for your guide book on how to launch your business at the perfect time. I know you’re going to be able to sell that. This has been great. Thank you so much. How can people learn more about your

 

Mike Fleming  28:55  

website, probably the best place so it’s www.salestaxandmore.com all spelled out. We have a lot of information there. We do. free webinars, provide for CPE credit, which is continuing professional education, a lot of CPAs need that we do two or three times a week, you’ll find that information on our website. We also have a YouTube channel and, you know, short snippets, you know, generally videos of five to seven minutes talking about a number of these topics, and we have our podcast also. So a number of different ways to find this and all of it can be found through a website.

 

Julie Musgrave  29:38  

All right, we’ll head to that website. Make sure y’all check it out. Mike, thanks so much.

 

Michael Fleming 29:43  

Thanks, Julie.

 

Intro  29:44  

Thank you for listening to the Smart Business Revolution podcast with John Corcoran. Find out more at smartbusinessrevolution.com and while you’re there, sign up for our email list and join the Revolution Revolution Revolution, revolution. And be listening for the next episode of the Smart Business Revolution podcast.