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Category: Tax
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We owe a large amount of sales tax to state of MI. My husbands

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We owe a large amount of sales tax to state of MI. My husbands business has never made a profit and we have been audited 2 times by Irs. Probably cause we don't make any money. I am almost positive they will audit us again. We would like to sell the business. But who buys a business that doesn't make money. How can we resolve the sales tax issue. We don't have the money to pay $27,000. And we have to pay the employees as few as there are.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.


Sales tax arrears are one of the most difficult things to put behind us. They originate from using money collected for the state (in this case sales tax) for the operation of the business. To begin getting this behind you the following path should be considered:


One of you should get a job outside the business. The funds earned at that employment (after tax withholdings) should be used to make payments to the tax arrears. After a few months of continuing good faith payments the state will be willing to work out a payment plan. During this time all sales taxes collected should be placed into a bank account annotated as existing for sales taxes. This will remove the money from business operations and, if carefully maintained and honored, will further serve as evidence to the state that you are trying to do the right thing. You may even then be able to make an offer in compromise with the state. An Offer in Compromise (OIC) enables you to settle the debt for a reduced value. This value will probably be for the original amount of tax due and will then save the added interest and penalties costs.


I know this will be a difficult thing since you will be stretched for time but it is the best way to move forward to get out of the hole you are in. Remember that sales taxes are also capable of being declared a personal responsibility and the state can come after you personally.


As to the IRS, if the audits resulted in no change to returns they will not likely be back for some time. If they did make changes and additional tax was due they very likely may be back. If you do not presently have professional representation I recommend that such be obtained. IT can be well worth the money spent.

Here is a short statement from Michigan about OIC's:


<table border="0" cellspacing="0" cellpadding="0" width="640">Collections/Delinquent Accounts Will Treasury accept an Offer in Compromise? Answer: The Department of Treasury is prohibited by law from compromising the tax or principal balance on debts owed to the State of Michigan. Interest is considered to be a cost of doing business and is rarely waived. Penalty waivers are occasionally granted provided reasonable cause is established.


As you can see, the likelihood is that the best you can expect is a reduction of the penalty portion of the debt. That is why professional representation is needed to get you through this and is also why I recommended the other portions of my remarks.


Here is link to the state's web page on sales taxes:,4676,7-238-43529---,00.html#What


Category: Tax
Satisfied Customers: 3820
Experience: over 40 years experience in tax matters
CGCPA and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

I figured that would be the result. No they did
Find that we owed additional tax and everything
Turned out fine. Although we had to appeal
Their first decision. As I failed to mention there
Are 2 separate business and we each run one
With little or no pay (me not paid). Husband
Very little. Just enough to pay house bills.

Can we close the business and still try to negotiate
With payments. What do you recommend
Business are under desperate companies
So they are not linked together

You can negotiate a payment plan at any time, even after a business is closed. I would try to sell a business first. If it can be sold there will be more to help reduce the debt. With one business gone you may be able to make the other business profitable.

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