Washington, D.C.— Yesterday, the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access, under Chair Andy Kim (D-NJ) gathered small business owners to hear how online sales taxes are impacting small businesses in the wake of Supreme Court decision South Dakota v. Wayfair, Inc.
“The Wayfair decision has created real problems for small businesses like Stikatto, an eCommerce business based in Moorestown in my district,” said Congressman Kim. “Hearing from Meredith Funston, one of our local small business owners, underscored the importance of Congress coming together for our entrepreneurs. We’ll continue to work – Democrats and Republicans – across the aisle to create real solutions for the issues we heard about today.”
In 2018, the Supreme Court ruled that states are legally able to collect sales taxes on transactions involving businesses without a physical location within state lines. In the aftermath of the decision, small businesses that wish to sell their products in other states must collect and remit sales taxes according to the state where the transaction is taking place. This has left small business owners with the responsibility of complying with 10,814 separate tax jurisdictions that are frequently subject to change. This places new burdens on small businesses in the form of increased compliance costs and a higher probability of error when collecting taxes.
During the hearing, members heard from entrepreneurs about how the ruling is being applied in individual states and their overall experience complying with the new requirements. The hearing also covered steps the federal government can take to ease the compliance burden on small firms and ensure the ruling is not hindering small business growth.
“Taken as a whole, there are often prohibitive costs attached to ensuring that the compliance is performed correctly, whether completed in-house with dedicated tax staff, or completely outsourced,” said Jamie Yesnowitz, Principal at Grant Thornton, LLP. “If left unchecked, the lack of uniformity in which the states have reacted to Wayfair could impair the ability of small businesses to grow, result in a loss in productivity that impairs the economy as a whole, and hamper their accountants’ ability to efficiently and effectively serve them.”
“I know very few small businesses in compliance. Some are still unaware and when I discuss it, they look at me like I’m crazy and just plain wrong,” said Linda Lester, Vice President at K-Log, Inc. in Zion, Illinois. “Others are trying to comply and failing miserably. The majority are hoping that they can keep “under the radar” and wait it out until the federal government steps in to come up with a comprehensive nationwide solution because this simply can’t be the way things will be from now on.”
“I understand how hard it is to compete with the likes of Amazon and Walmart, and it would not be fair for a brick‐and‐mortar to have to collect sales tax while an online‐only company would not,” said Kevin Mahoney, President and Founder FindTape.com in North Brunswick, NJ. “But, when someone comes into my store, I don’t have to ask them which one of the 10,000+ taxing jurisdictions they live in, plus I get the benefit of police and fire protection, roads are plowed and repaired, good schools exists to supply talented employees, etc. from the taxes I am paying.”
“As we heard today, small businesses need tax policy that is simple and certain, not ever-changing,” said Congressman Kim. “Small businesses also need tax policy that levels the playing field and creates opportunities for their businesses to thrive. I look forward to working with Members on both sides of the aisle to solve these issues for America’s small businesses.”