Amy Baxter’s business took off after she appeared on “Shark Tank” with her device that blocks pain from injections – orders flowed in and she bulked up her inventory.
But after sales hit a temporary speed bump, Baxter learned there was no tax break for the merchandise she hadn’t sold yet.
“I remember sitting at my parents’ house, realizing there was no way out of this,” says Baxter, a pediatric emergency physician whose company, Pain Care Labs, sells Buzzy, a device that uses a combination of cold and vibration to reduce injection discomfort. “I was going to have the worst debt of my business.”
Small business owners can be devastated when upon learning they owe the government thousands, or even tens of thousands, of dollars. It can happen at any stage of a company’s life, and can be the result of poor planning or not getting advice from an experienced tax adviser. But changes in tax laws can also leave owners with unexpectedly large bills, and tax advisers warn it can happen to more companies this year because of the many unknowns about the new tax law.
Baxter appeared on the TV show “Shark Tank” in 2014 with Buzzy and had her best year since starting the Atlanta-based business in 2006. She significantly increased her inventory, but sales to pharmacies didn’t take off as expected. Baxter thought she could write off the unsold inventory but learned from a fellow entrepreneur that the IRS doesn’t consider inventory to be a cost until it is sold or disposed of.