Trust fund taxes in small business vehicular are payroll and sales taxes. Both of these taxes are collected on behalf of the government and are a tax which the employer will be personally liable for even if the business ceases operations. With both taxes the business is acting as an agent for the government and passing then the taxes collected on behalf of the employee for payroll taxes or the customer for sales tax directly to the respective government entity.
As a result when the government fails to receive the sales or payroll taxes which are due the become very irritated. As the money was never the business owners to begin with the government will not forgive this debt and of pushed will even pursue criminal charges against the owner for failure to pay. The bottom lime there is zero circumstances in which a business owner should not pay these taxes. Do not pay your employees their net pay and use the rest to pay other bills; Do not use the sales tax portion of the sales to pay other bills. If you do this you are walking a slippery slope where you may end up needing a criminal attorney to defend you and certainly, the fines and interest on sales tax are very steep.
If you do run into cash flow problems pay your payroll and sales tax while exploring other options to save money. Perhaps, you can negotiate a reduction on an equipment lease or a past due payable. Look over your income statement and see if you have any expenses you can reduce such as payroll, advertising, travel. Review your accounts receivable and see if you can collect some overdue balances. Explore your options but make sure you pay your payroll and sales tax.
If you find yourself struggling payoff bills consult with an outside professional. Business Advisory Center has been helping small business owners since 1997 manage their cash flow and obtain debt reductions on accounts in collection, litigation and has even settled judgments all of court at savings between 22% to 50%-with payment terms of 3-12 months on the reduced balance