The daily demands of owning a restaurant are extensive and wide-ranging. From back office tasks to managing staff to ordering food, the list seems endless. Managing sales tax often gets pushed to the bottom of the to-do list. Yet, the penalties and risks associated with not paying sales tax are steep.

If you’ve fallen behind on sales tax, you’re not alone. Having enough cash on hand to pay the sales tax bill when it’s due is a common challenge. In fact, our records show that about 60% of merchants had unpaid sales tax when they started using DAVO Sales Tax to automate the process. If you find yourself owing more sales tax than you can pay, there are steps you can take to get back on track and out of debt to the State.

How to get back on track with unpaid sales tax payments

1. Stop the endless cycle of missed payments. Make a sales tax plan today.

The first order of business is to stop the bleeding. While you will need to address the back sales tax owed, put a plan in place for moving forward. If you don’t ensure that current sales tax is being accounted for and paid, you may be creating an endless cycle of late or missed payments.

Sales tax calculations, payments and filing can all be automated with sales tax automation apps available on your SpotOn restaurant POS system. To prevent cash flow issues and ensure payments can be made on time, apps like DAVO Sales Tax set aside the funds collected from sales tax each day and then use those funds to file and pay sales tax when it’s due. Automatically.

2. File all past due returns to determine what you owe

Once you have a plan in place to manage current sales tax liabilities, determine how much you owe in back sales tax. Even if you cannot pay right now, it’s important to file back sales tax returns. While it may be painful to take this step, filing the returns shows a good faith effort with the State revenue department.  

3. Use your sales tax plan as proof of good faith effort to pay

It’s important to show a good faith effort that you’re trying to pay unpaid sales taxes. A plan and process to pay future sales tax, whether it is DAVO or your own manual sales tax management, can be beneficial in negotiations with the State. We have heard from some sources that tax officials like to see that a merchant is using DAVO because automation ensures that sales tax will be paid accurately and on time. With a plan and good faith effort to pay, you can put yourself in a better position to work on a mutually beneficial arrangement with the State to get unpaid sales tax paid off.

4. Determine a repayment plan

Start to repay unpaid sales tax, even if you can only afford small amounts initially. Research repayment options that offer favorable terms and interest rates. Many POS systems, including SpotOn, offer working capital loans for small businesses that can be repaid directly from a percentage of your sales, so you pay more when sales are good, and pay less when sales are slow. You may also consider a personal loan or even a plan directly with the State. The more good faith you’ve built with the State, the better chance you have of negotiating favorable outcomes. Keep in mind, if you need to finance your repayment, you may want to consult an accountant to help you decide which route to take.

You can’t escape sales tax liability

Over time, the risks of unpaid sales tax add up quickly. Penalties and interest that is charged on unpaid balances can be between 5% and 50% of the balance due. In circumstances where sales tax goes unpaid for longer periods of time, the State may decide to place a lien on your business. With a government lien, you’ll be facing a host of financial problems, like getting a loan.

Even in bankruptcy, sales tax liability does not disappear.

In case the risks to your business aren’t daunting enough, unpaid sales tax is a personal liability. Even if you close your business, you are still personally liable for the sales tax owed and associated penalties. Even in bankruptcy, sales tax liability does not disappear. You can’t escape sales tax debt, which is why it’s so important to get back on track.

Get back on track with sales tax automation

If you find yourself with a hefty sales tax bill that you’re struggling to pay, remember, you’re not alone. Many restaurant owners have gotten behind on sales tax and have found their way out of the red by taking steps like those shared here. The risks of unpaid sales tax liability are serious, which is why it’s best to tackle your unpaid sales tax head on.

DAVO Sales Tax can help you get back on track to start and keep you out of trouble moving forward. Automating sales tax takes just a few minutes to set-up and then you never have to worry about sales tax again. The app integrates seamlessly with SpotOn and is free to try for the first month. Put your sales tax on autopilot and stop worrying about how it will get paid.


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