GRIFFITH LAW GROUP LLC recently published its Indiana Law Update e-newsletter with articles about these topics:

• Estate Planning Basics- Wills & Trusts
• Quitclaim & Warranty Deeds
• Safe Driving Rules & Liability Risks for Businesses
• Announcing the addition of Drew Strobel as an associate attorney

Please feel free to read all the articles on the GRIFFITH LAW GROUP website and sign up for its newsletters.

Have you ever heard of use tax? Did you know such a thing existed? If not, you may not be familiar with what it is and how it works. Actually, the majority of practice owners we talk with are not. Here’s what you need to know about use tax and what you should do to protect yourself from an expensive audit.

Let’s call use tax the brother of sales tax. Sales tax, as you are likely aware, is assessed on items you purchase for your practice — most of the time. Vendors who sell you product like supplies, furniture, and IT equipment may or may not be required to collect sales tax from you. If you are buying all of these items from an in-state provider, you are most likely in good shape. However, out-of-state vendors may not have a responsibility to collect sales tax from you. For instance, a vendor from whom you purchased a product over the internet or through a catalog may not collect sales tax on the sale. Contrary to some belief, this is not a built-in discount — this is where its brother, use tax, kicks in.

Most states have a use tax that is self-paid by the purchaser of products when sales tax is not collected. So when your dental practice purchases a new chair online and sales tax isn’t assessed, you are then responsible for reporting and paying use tax on this purchase. In addition, if you paid sales tax on the purchase but at a lower rate than your state’s sales tax rate, you may be liable for the difference. Say you purchased an order of cotton balls online and the supplier collects 5% sales tax on the order. If your state has a 7% sales tax rate, you should then report the 2% difference to them and pay it.

The most important thing to be aware of here is that someone is responsible for paying some tax on these purchases (unless they are specifically exempt, which varies by state and usually includes prescription drugs, etc., but more on this later). If a vendor forgets or didn’t know they were supposed to charge you sales tax, it’s your responsibility to pay it as use tax.

Why haven’t you heard of this before? Many dentists and small business owners just aren’t aware of the use tax. Historically, there haven’t been a lot of audits of small firms for owners to be concerned about it. But this is changing. With states seeing massive budget shortfalls, they are looking anywhere they can to find missed revenue. In many cases, they are able to go back 7 or more years to audit your purchases and identify purchases made where sales tax was not assessed. When an audit occurs, not only is there risk of a tax assessment but also penalties and interest.

As mentioned above, there are some items that are exempt from sales and use tax. These vary by state so I’m going to share with you a link to Iowa’s exempt items list which is specific for dentists. Indiana’s is much more vague in identifying specific exempt items; however, the rules for some states often have similarities and overlap in their definition.

So what should you do for your practice? Be aware of the purchases you make and if you are paying sales tax at the time of purchase. If you are buying products online primarily to save sales tax, know that this isn’t a legitimate savings strategy. If you feel you have made purchases where sales tax has not been paid, consult with your dental CPA or tax adviser to develop a plan to address the exposure. And by filing now, you will shorten the period of time with which an auditor can go back. Usually timely filing of returns starts a statute of limitations on how far back an audit can go – even if it’s a zero tax return.

- This article was submitted by our friends at Veros Dental | 5955 South Emerson Avenue, Suite 500 | Indianapolis, IN 46237 | 317-452-4580

asset protection- the basics

Q: What’s wrong with this photo?

A: It’s a photo of a paper towel dispenser that was installed in my office building restroom this week.  The problem is that the dispenser was installed upside-down, with the slot for the towels at the top.  Last time I checked, gravity pulls paper towels down and not up.  So, unless you are 7 feet tall or have a really skinny hand with long fingers, you’re never going to get a paper towel out of this dispenser.

Q: What does this photo tell you about growing your business?

A: Our businesses are not about us.  Your business is not about you.  It’s about your clients and customers.

The person who installed this towel dispenser forgot this critically important lesson, or may be never learned the lesson in the first place.  Would you not think to actually put some towels in the dispenser as part of the installation process and test whether the dispenser works?  I sure would have.  I would have also checked the placement, the height and the metal edges to make sure the dispenser was functional and safe.  In short, I would have taken 60 seconds to live the experience my customers would experience to determine whether my clients would be well-served, under-served or poorly-served by this dispenser.  If it is worth the money and time to install a towel dispenser to serve my client’s restroom needs, then it is worth a few extra minutes to serve my client’s restroom needs well.

The baseline question, however, is this:  What processes, procedures and steps have I put in place to judge, measure and gauge my clients’ experiences working with my company?  How about a survey?  Better yet, how about a confidential survey from a third-party?  How about having trusted friends and family test and evaluate my products and services, on the condition that they agree to be brutally honest in their responses, comments and feedback?
Whatever system you put in place to measure your clients’ experiences in interacting with your company, the first step in the process is to recognize the need to think more like a customer and less like a business owner or manager.  Said differently, the best business managers think about the customer first and the backroom operations last.  Profits never flow when the customers don’t show.  It’s all about happy customers and clients.  So start thinking like a client today, and you’ll increase your odds of profitability tomorrow.

Do I Need a Lawyer to Form a Business? from Matthew Griffith on Vimeo.

Asset Protection Basics from Matthew Griffith on Vimeo.

You have decided to start or maybe purchase a business.  Now what?