It’s Just a Business License… Until Gross Receipts Are Involved

Tax and/or Regulatory Departments really like to keep business license compliance off the company radar. After all, can news about your business license compliance ever be good news? It’s not like one of the executive suits ever submits Sally’s name for Employee of the Month because “as far as we know, she kept all of our business licenses in compliance!” Never gonna happen.  So let’s avoid the radar, right?

There is one thing that is certain to get you on the company radar, and as you might suspect, it’s not a trophy-worthy occurrence. Ignore a Gross Receipts based business license registration or license renewal and eventually you’re going to owe a bunch of money.  And penalties. And interest. The same kind of trouble your sales and use tax colleagues avoid like a drunk at the pistol range.  Or an auditor in a windowless room.

It makes sense to use the same care and concern with Gross Receipts based business licenses that you would with your sales tax reporting responsibilities. Companies that don’t are inevitably sorry that they didn’t treat these licenses and reporting with greater respect. Take this company for example – they had hundreds of facilities in a number of states that had been amassed through acquisitions over a ten year period. The small companies they had acquired had done a poor job of initial business licensing and the constant flow of new acquisitions caused them to take their eye off the legacy renewals. That turned into double trouble when a city auditor asked for their business license and his share of the revenue. Then the issue gets into the wind and several other municipalities start dropping by to take a look at the books and begin wrestling for their share of a large six-figure settlement. What did they have in common? All had gross receipts elements to their business license registrations and renewals.

How do you fix that before it gets on the radar?  Well, you don’t if there’s money involved. So take early precautions with those gross receipt “taxes” and know where you may be off the mark. Look at your business licenses (or lack of) by location and match them against a reliable licensing database to help you collate your locations by jurisdictions with a gross receipts reporting requirement, those with a less imposing flat fee requirement, and those with no licensing requirement. It’s quick and inexpensive to do. And if you still see a windowless room in your future, start to slowly and proactively fix it.  Prioritize your locations, get the base research done for you, create a remediation strategy, and get some locations on a “below the radar” trajectory. That’s the flight plan well clear of the pistol range.