By Isaac Bonnell
For the average person, tax season is done. The grumble has subsided and thoughts turn to the impending arrival of a tax return or a dreaded visit from the Internal Revenue Service.
But for many businesses, taxes are a part of daily life and the consequences of not paying them are more severe. If you don’t pay your taxes on time, the state can shut you down.
That is a last resort, though, said Department of Revenue (DOR) spokesperson Mike Gowrylow.
“We have a graduated enforcement program,” Gowrylow said. “But ultimately, if we think the business is just going further into the hole, we’ll revoke their business license — especially if it’s a retail business that is collecting sales tax from its customers.”
The DOR is the agency that collects sales taxes and business & occupation taxes. The state collects these taxes from businesses at different times throughout the year, depending on the size of the business. The larger businesses with more revenue report monthly; others do it quarterly and the smallest businesses report annually.
Different agencies collect at different times, though, and that can be difficult for some people to keep straight, said Heather Pavlosky, owner of Bellingham-based Pavlosky Accounting Solutions.
“What happens is you get the money in the summer when business is booming and then you owe the money in January when sales have dried up,” Pavlosky said.
The key is to save tax money as it accrues, Pavlosky said. That way you avoid getting stuck with a large payment at the end of the year that is difficult to pay.
Should you find yourself owing taxes or paying them late, do not be ashamed — it happens all the time. Sometimes people simply forget to pay their taxes and just need a reminder phone call, which is the first thing the DOR does if you miss a payment, Gowrylow said.
If a business cannot make a lump sum payment, the DOR can then set up a partial payment plan to pay the taxes over a set period of months. Other state departments have similar programs, but some will charge additional late fees that range from 5 percent to 25 percent based on how late a payment is submitted.
When the economy is good, most businesses don’t have a problem paying taxes on time, Gowrylow said. But when the economy isn’t doing well and the bills start to pile up, taxes are often the first thing a business will skimp on because of the leniency periods.
“Compliance is really good for the most part. But when we have an economic downturn like this, more businesses get into trouble and we have to ratchet up enforcement,” Gowrylow said. “When times get tough, our job gets a lot harder.”
The DOR doesn’t have a set timetable for businesses paying back taxes; it all depends on how responsive the business is and what the department can negotiate with the owners.
So the best thing you can do is be honest with the collection agents and keep in contact, Gowrylow said. Otherwise, you could get a notice that your business license has been revoked.
“Clearly, if a business never calls us back, it’s going to happen sooner rather than later,” he said. “Look, we want you to stay in business, but you have to pay your taxes.”
Delinquent business taxes on the rise
The number of businesses owing taxes and the dollar amount of outstanding taxes have risen during the recession.
Employment Security Department: The following statistics are a snapshot of delinquent taxes at the end of each calendar year. The first quarter of 2010 is already higher than previous years.
• 2008: 39,495 delinquent accounts, representing $28,717,439 in unpaid taxes.
• 2009: 73,164 delinquent accounts, representing $27,581,662 in unpaid taxes.
• 2010 to date: 51,475 delinquent accounts, representing $30,096,830 in unpaid taxes.
Department of Revenue: The DOR keeps quarterly reports on tax warrants. The number of warrants this year is lower than last year, but the dollar value of outstanding taxes has increased.
• Q1 2008: 3,766 tax warrants, totaling $35,340,823. The DOR revoked 158 business licenses.
• Q1 2009: 4,433 tax warrants, totaling $63,957,475. The DOR revoked 210 business licenses.
• Q1 2010: 4,128 tax warrants, totaling $68,579,424. The DOR revoked 200 business licenses.
Department of Labor & Industries: L&I keeps annual statistics on tax warrants that it issues.
• 2007: 9,630 tax warrants, totaling $45,137,682.
• 2008: 9,200 tax warrants, totaling $45,040,547.
• 2009: 11,980 tax warrants, totaling $53,228,387.
Sources: Employment Security Department, Department of Revenue, Department of Labor & Industries.