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

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  


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.

Outro  29:44  

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