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Comment by nkurz | Hacker News Reader

My impression (as a failed American businessperson who aimed for full legal compliance) is that successful businesspeople (at least in America) tend to accept that full legal compliance is impossible and instead worry only about the risk of noncompliance.

As such, I think the much more common approach is to ignore even the clear local requirements until there is a demonstrated downside to doing so. Proactively worrying about compliance on the edge cases where no one is currently losing expensive losing lawsuits is viewed as somewhere between insane and suicidal.

Are you perhaps from a more traditional country (or part of the US) where obeying the law still has a strong moral component?

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Seriously - the revenue can come and audit me if they think I'm in the wrong, and I'll happily pay the costs of coming into compliance if they can demonstrate why those costs need paying.

Otherwise? Screw it, I'll just do the best I can with either a scattered brain and handful of receipts, or a few hours of a desultory tax attorney's time.

If you want better, make the rules simpler. I don't have the money or time to deal with this byzantine bullshit properly, and the tax collectors not going to convince me that it's worth my time to do proactively with any argument short of a gun.

Even hiring a remote team is incredibly difficult. Want to hire someone in a new city? OK, register with the secretary of state, complete the business licensing, depending on state you may need a registered agent for the area they live in, and your tax paperwork will be there in 21 days. Hope they don't need payroll until then!

Use a PEO, bam, done!

Tax avoidance is a felony.. so there is that.

Sorry to be pedantic, but tax avoidance is completely legal and encouraged. Tax evasion is illegal.

In the former, you make legal financial decisions that minimize your tax burden, in the latter, you illegally hide your wealth. It's not always black and white, but the distinction is important.

http://www.nouse.co.uk/2013/01/22/what-is-the-difference-bet...

There are some really insane and conflicting local, state and federal laws in the US when it comes to running a business and especially if it's retail. It's easier to ignore for most small and medium business until there's an audit. Personally, I find the whole sales tax situation to be borderline insane. I understand the need for local governments to have a revenue source - I totally do. However, it would make it easier for businesses to comply and local governments to maximise tax collection if they simply all get together and have one collection agency at the federal level which then splits the revenue according to place of sale and sends it back.

Canada has a Harmonized Sales Tax which covers both provincial and federal taxes, it works wonders and saves hundreds of millions of dollars a year in useless bureaucracy. Canada supports this suggestion. ;)

You have the risk that such revenue is divided unevenly based on other criteria. Taxes should be ideally local: being global makes it easier for low tax revenue places get money from high tax revenue areas.

Not to mention that competition lowers taxes for sure.

By contrast Australia has GST (goods and services tax - 10% universal sales tax on almost everything except a few “essentials” exceptions like fresh food, some basic utilities? But is generally only paid by consumers - businesses claim back the GST that they pay ) which is collected federally. And all our tax is handled by one federal agency.

Generally speaking all prices listed are GST inclusive at least for consumers and store fronts. You pay what the price sticker says.

Where it breaks down for us is that GST revenue is split on a determined percentage per state that is unrelated to where it’s collected. There is some sense to that but it also causes problems as there is a strong imbalance which is argued about.

On a related note we do have a 5% payroll tax on all salaries in businesses paying over some figure I think $2m/year. This apparently goes to the relevant state and is one of our little inconsistencies left compared to what is on the whole quite a good federally administered system by one agency. One tax return. One tax rate.

> successful businesspeople (at least in America) tend to accept that full legal compliance is impossible and instead worry only about the risk of noncompliance

That's because it's cheaper to settle than to be compliant as a result of prosecutors willing to settle for a fraction of what would otherwise be due, but avoiding a long trial.

If government is not involved businesses often settle for more than would otherwise be due, to avoid a long and costly trial. Curious..

Anyway, in most civilised world the opposite is true. Non-compliance can be VERY costly.

Going back to your question: I've run my first businesses in EU and I still have EU mindset. I'd rather have the piece of mind knowing that I'm compliant.

And as much as it's going to sound weird in the light of Apple tax "optimisation" I can afford to pay my taxes, even if I don't live in US and don't benefit from them in any way and know most of them are going to be wasted.

That's because it's cheaper to settle than to be compliant as a result of prosecutors willing to settle for a fraction of what would otherwise be due

That's likely true, although I think the dominant factor is probably the laxity of enforcement. That is, even if the penalties far exceeded the cost of compliance, if your chances of being caught are small enough, the economics (if not the morality) favor noncompliance. There is also the problem that attempting to be compliant can call attention to your noncompliance, thus perversely increasing that chances that you will be penalized.

Anyway, in most civilised world the opposite is true. Non-compliance can be VERY costly.

In my mind what is worse about the current US system is that once one accepts the existence of contradictory regulatory regimes combined with lax selective enforcement, most of leverage that would keep the system sane is lost. If the penalties are severe and regularly enforced, there is a much stronger feedback to make full compliance efficient, or at least possible.

I'd rather have the piece of mind knowing that I'm compliant.

While it may provide peace of mind, realize that there is almost no way to know all the rules, and you are almost definitely noncompliant with regard to some of those you do not know. There are likely agencies that believe they have jurisdiction over you that you've never even heard of.

In my case of running a vegan frozen dessert business in California, while my research had revealed that the California Dairy Board reserved the right to regulate non-dairy frozen desserts (under the theory that a consumer might be confused into thinking that they were a dairy product) I was surprised when the federal Food and Drug Administration found me noncompliant for failing to properly register under the theory that since we had purchased some of our ingredients from another state (cocoa powder) we were engaged in interstate commerce and thus subject to their regulatory burden. While we ended up not paying any fines, and while the agents involved were polite and respectful, there were several painful days wasted on record searches and interviews with all of our key employees.

>> I'd rather have the piece of mind knowing that I'm compliant.

Well that's the problem, in my opinion. I tend to try very hard to ensure I'm compliant: I read contracts before signing them, etc. Increasingly I have no idea if I'm compliant because the contents of contracts and laws seem arbitrary and vague to me, and you have to be the person who will decide or be the lawyer who works with them to have any sense of if you're compliant or not. There's no 1 checklist you can go to to make sure you're complying with laws from multiple branches of multiple layers of government.

Perhaps it's more accurate to say that most successful businesspeople realize full compliance is impossible, and go for the 80/20 rule: 20% of the effort to get 80% compliance. At that point the IRS will go after people who are more obviously 0% compliant.

> successful businesspeople (at least in America) tend to accept that full legal compliance is impossible

This REALLY depends on the level of law. Local rules? Maybe. State or federal laws? Playing with fire. Case in point: Lyft, Uber et al versus Zenefits.

Disclaimer: I am not a lawyer. This is not legal advice. Do not break laws.

It depends on the law. There's a big difference between a specific niche business not complying with some ambiguous, contradictory tax laws and Uber which bases their entire business model around cost savings from skirting a handful of labor laws that basically every business must be conscious of and skirting local regulations on taxi services but entrenching itself too deeply before enforcement can kick them out.

Is there a possibility for a private company to help business in compliance for a very small fee? Some kind of startup?

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