Small Businesses Struggle with Vast and Complex Online Sales Tax Requirements
WASHINGTON – Today, the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access heard from a panel of experts and small business owners on challenges faced by small firms following the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc.
“Small businesses, entrepreneurs, and startups are transforming neighborhoods and communities from my state of Oklahoma to Minnesota and beyond. While driving the country’s economic engine forward, these small businesses often operate with limited staff and resources,” said Ranking Member Kevin Hern (R-OK). “With new customers, in new locations, the question of taxes has become instrumental not only for businesses, but also states across the country.”
High Costs, Staffing Demands, and Sales Thresholds Pose Challenge
“To date, our small business has spent more than $183,000 to collect less than $80,000 in sales tax. Breaking that down, we are spending 2 dollars and 31 cents on every dollar we collect,” said Mr. Brad Scott, Financial Director, Halstead Bead, Inc., in Prescott, AZ. “We have diverted over 3,800 [labor hours] away from our business operations to act as unpaid surrogate staff to 30 departments of revenue, where we are currently filing.”
“My struggle is with the chaotic manner in which remote sales tax has been mandated, as well as the expense in time, money, and energy these mandates have imposed,” said Mrs. Linda Lester, Vice President, K-Log, Inc., in Zion, IL. “I fear that when all the states start notifying businesses that they owe thousands of dollars for on taxes on past sales, that they never collected in the first place, companies will start shutting down and jobs will be lost. All because of a tax due that they didn’t even know about in the first place.”
“Many states now have marketplace facilitator laws in place which require marketplaces such as Amazon to collect and remit taxes directly to the state. However, the economic nexus laws do not provide any clarity of companies like mine are able to use a separate threshold for our direct orders, rather they get lumped in with the orders the marketplaces are facilitating tax collection on,” said Mr. Kevin Mahoney, President and Founder, FindTape.com, in North Brunswick, NJ.
“Collectively, we have seen swift and dramatic state legislative and administrative responses to Wayfair, but such responses are not entirely consistent from state to state,” said Mr. Jamie Yesnowitz, Principal, Grant Thornton, LLP., in Washington, DC. Mr. Yesnowitz testified on behalf of the American Institute of Certified Public Accountants (AICPA). “Prior to Wayfair, small businesses with physical presence in multiple jurisdictions already had to comply with a variety of sales tax registration requirements, taxability questions, invoice and exempt certificate management, collecting and remitting the proper amount of sales tax...”