The Pain of a Small Business Owner (2)

Hurray, Santa Claus is coming to town again ... When? Not Christmas but this tax season!

Contrary to popular belief, the last two years' tax season had somehow turned out to be seasons to be jolly. Now another tax season is coming and Santa is coming again this tax season. No, please do not think that I became delusional because of the burdens I bore as a small business owner. I am serious and I am really not mistaking this season from Christmas.

But why is tax season a season to be jolly? Because it really is, at least for some people, because the US government once again is giving away billions of dollar again this year for working people (just like whet they did last year). Good for them, but what about us, small business owners? I guess we're not as lucky. We're never in the best interest of the government because we're probably not that important albeit we provide employments and pay more taxes than employees. Most employees do not realize that for every cents deducted by government for Medicare, FICA and social security taxes, we small business owners pay the same amount of taxes, the only difference is that we cannot claim them back in our tax return.

When the economy was good, small businesses were doing quite well. In the past few years during the real estate boom, many new small businesses sprang up like weeds in spring, but now most of them had either gone bankrupt or changed owners. I recently went back to a small Asian shopping complex in Milpitas where I used to eat lunch when I was working in Fremont, and I noticed that the whole complex had changed. The place whee I used to buy my House Special Fried Rice for lunch is no longer there, it was replaced by another Chinese Restaurant. The place where I used to eat dim sum also went out of business, and now a sit-down place. The only restaurants survived in the complex are Vung Tau 2 and Tung Kee. I guess they have made enough money in the past so they can still subsidize their current operation.

During the boom, many people envied small business owners because they thought that small business owners make easy money. Well, easy money it is for those who are successful, like the guy who started Fantasia in the Bay Area or YogurtLand in Irvine, but life was not as easy for most business owners. And now as the economy is dying, most people cut off their spending because they do not have too money to spend in the first place. Many have already maxed out in their credit card and witnessed the decline in their savings, investments and property value and they reacted drastically. These situations affected small businesses greatly, small businesses are fighting for the small remaining customers with lower prices and free perks but it still does not work very well. The increase of raw material costs last year did not help small business owners either. The increase of cost is hard to pass on to customers who are already deserting their shops. Some raised their prices modestly, while others kept their old prices while reducing the portion or the quality of their products or services. It hurts both the customers and the small business owners. Still with less revenue, many small business owners could not generate enough income to cover their fixed and overhead costs, no wonder small businesses all across the country are floundering in 18 months or so.

Many small business owners lost a lot of money even up to every single cent of their investment, if they paid with their own money. Those who received loans from the banks fared a little better because they did not lose as much (the banks did), but they were still forced to either file bankruptcy and/ close their business completely. Some were even haunted by relentless calls from debt collectors. Now, if I were to ask you guys who do not run a small business, don't you feel glad that you just work for another people? You should!

Indeed some small business owners still thriving amidst the dire situation, but many did so at the expense of other people or the government. Many small business owners cheated on their taxes (That's nothing new, isn't it?). There are few common ways small business owners cheated their taxes. The first one is cheating their income taxes, many small business owners claimed a lot lower revenue than last year, which is partially true because there is indeed a large decrease of revenue coming into their pockets, but some people even went further. They operate their business from their homes and never really report the income. The popularity of online auction and marketplace sites like E-Bay provides a great avenue for such small business owners. The second way to cheat is by cheating their sales tax revenue. Many small business owners began charging no tax to customers who pay cash because they wanted to lower their sale price, and they did not pay their sales taxes either.
The third way to cheat on taxes is by buying products and/or services which are supposed to be taxable direct from wholesalers without paying taxes by claiming to resell them. Small business owners who have a valid reseller permit often exploited this by buying things like signs and printed material directly from wholesaler. Their acts were the shadiest of all, because large wholesalers are slow too these days, so they're pretty hungry and willing to take any orders from anybody just to keep them busy. Some wholesalers even did this deliberately by selling their products direct to retail customers, while others do not bother to distinguish between true resellers and end-users. I know for a fact that a sound system company in Ontario, CA who purchased their signs and graphics from a wholesaler while claiming they're reselling them. In fact they merely want to pay less for their signs plus not having to pay sales tax.

Is it bad enough? Not yet. Many other small business owners preyed on their subcontractors, contractors and resellers. Many did not know this, but many small businesses relied on other businesses to run their operation. Many small businesses who claim to be manufacturers are merely brokers, especially if they sell their products very cheaply. Let's take a simple example of a flag and banner seller in E-Bay, many of them claimed to be the manufacturers but in reality the manufacturers is in China, they're just brokers. Did you notice that some of them have location in East Coast and yet their stocks are stored in the West Coast? Yes, that further reinforce the assertion that they're just merely brokers. They bought their flags and banners from a direct importer in California, and just have them shipped from their warehouse instead. In this tough economy, some wholesalers are starting to complain that some of their accounts do not pay their bills and now they start asking for credit card instead. Many companies which subcontracted their jobs often lost money also because their subcontractor suddenly disappeared too. Some small businesses even pay for products and services by using checks with non-sufficient funds, one example is Platinum Audio in Murieta, CA.

The worst possible action done by small business owners these days is cheating their customers. Well, customers are important for small business owners because they bring business, but some small business owners are not shy or afraid in cheating their customers. The problem is widespread in the online community, take E-Bay sellers again for example, although there are many good and reputable businesses in E-Bay, many other sellers are simply crooks who take your money and never ship the products. Many online businesses are also targeting customers by shady practices like offering free or cheap products or services while in actuality they led you to sign up for unnecessary contracts to pay a certain amount of money every month. Take freecreditreport.com or similar online sites. The worst part of this scam is that they're difficult or almost impossible to cancel. They do not provide an easy way to cancel.

Sadly, the plague is not only spreading in the online world, but also in the real brick and mortar businesses. Some brick and mortar businesses also "learned" from their online counterparts and started to sign people up for free or cheap services in which they secretly altered the contract and forced people to pay for exorbitant charges like a multi-year commitment and/or exorbitant cancellation fees. One easy example TanMan in West LA which tricked people to sign up for a cheap tanning session while actually charging them for a multi-year commitment.

Now, can anybody still say that a small business owner is having an easy life? Well, not for me... I have been tricked so many times that I almost become a paranoid. I now always ask for a down payment when I committed to a certain job, because frankly it's quite hard to get the payment these days, especially when dealing with people from Middle Eastern descents. No down payment means no job, simple. Even large companies skimped on their payments, maybe because my company is too small. They could have just told me, "Go to hell! Sue us!"

Specific about people from Middle-Eastern, let me clarify I have nothing against people from Middle Eastern descent in particular. I am sure some of them are honest people (I knew some people from Middle Eastern background when I was in SJ and they're fine people) but all Middle Eastern people I dealt with in Southern California seemed to crooks. The guy who gave me blank checks was a Lebanese, the guy who stole my money was a Iranian, and the other guy who shortchanged the payment was an Arab. Do not discriminate, but be very careful when dealing with them.