I HAVE a great small business in Tacoma. We sell marine electronics, surveillance cameras and walkie-talkies for police, fire departments and schools. The company has been around since 1965 and has a nice niche in the local market. When the Internet came along, we expanded the business to sell online, which today employs two of the nine people.
In May, the bookkeeper, Pat, came by and said, “Hey, have you seen this article on the Internet tax? They want us to collect sales tax and remit returns for the whole country. The Senate just passed the bill and that’s an impossible amount of work. We can’t afford to do that.”
Those words started my first-ever political activism.
The bill, the so-called Marketplace Fairness Act, would grant states the authority to require online businesses to collect state sales tax from the buyer at the time of transaction regardless of location. This would pretty much end my ability to compete online.
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The bill exempts businesses with out-of-state gross receipts of less than $1 million. An exemption that small is absurd. A million dollars in gross receipts sounds like a lot, but in a business with a 9-point profit margin, it’s only enough to keep one person with benefits employed full time.
Under the bill, states would first be required to simplify their sales-tax laws. There is a Streamlined Sales Tax Governing Board for the simplification effort, and it has four full-time staff. Don’t expect much help there. In 13 years, only 22 states have adopted the “simple” rules.
So how simple are the rules? Well, for starters, there are 9,600 tax jurisdictions inside the 45 states that collect sales tax. All these jurisdictions categorize and tax thousands of goods differently at different rates. All have different tax holidays, different rules for wholesalers, retailers and exemptions.
Then there are tax returns. Most states expect you to pay sales tax once a month. That’s 45 returns a month. I received a quote of $35 per return from one of the five Marketplace Fairness Act-anointed software providers to do this using QuickBooks version 9 or above. Do the math; it is nearly $20,000 a year to electronically file the returns. This does not include the work of getting the returns ready and dealing with audits by revenue-starved governments from around the country.
Well, who can afford to do this? The answer is large retailers, like Walmart, Home Depot, Best Buy and Amazon.com, who not coincidentallyare the biggest backers of the bill. Because they are nationwide, they already have to collect sales tax.
To add insult to injury, the bill proponents claim to be looking out for little guys, when in fact their biggest backers were responsible for the demise of many mom-and-pop stores long before the Internet saw the light of day. Lastly, the streamlined sales tax governing board gets a lot of their research provided by the big retailers and tax-software providers who will benefit immensely if the bill passes. This is special interest at its finest.
So what do I do now? By late May, I joined 650 other small business owners from around the country through the eMainStreet Alliance to kill this bill. Thirty of us, including me, traveled to Washington, D.C., to meet with lawmakers.
It was truly a great experience to walk the halls of Congress together for a common cause. I doubted the lawmakers would even listen to me, but they gladly did. Their message back was clear: Big retailers were lobbying hard for the bill and the members wanted the opposition to make their voices heard.
So here I am. This is a bad bill for small business. Please tell your member of Congress to vote no.
Peter Ollodart is president of Puget Sound Instrument Co. in Tacoma.