Sales Tax Bill Before Congress Could Greatly Hamper Entrepreneurs
By TERRI ALPERT | OP-ED
An innocuous-sounding bill before Congress, the so-called Marketplace Fairness Act, has the potential to crush many of Connecticut’s small businesses and stifle entrepreneurs.
The bill was handily passed in the Senate by a bipartisan majority and is now before the House. Under the measure, all “remote sellers” (including online stores and print catalog merchants) must collect sales taxes in every state and all taxing entities where they have customers. Businesses with less than $1 million in revenue would be exempt.
I’m all for fairness, but this bill will make the work of small businesses difficult and likely eliminate a key source of their revenue.
Here are three reasons for serious concern:
1. Perhaps you purchase via mail, filling out an order form, calculating your total and then mailing in a check. Guess what? Under this bill, that would become so complicated you probably won’t do it anymore. As senior citizens have the highest propensity to shop this way, this legislation effectively disenfranchises them.
2. Perhaps you seek out unique products not available in the mass market — or you simply like supporting the “little guy” — the artisan who made the item, the small store, or catalog, or special web merchant. Unfortunately, if this bill passes, they soon may be unable to continue to be there for you, because the cost of becoming a remote sales tax collector for some 10,000 different jurisdictions nationally simply makes it impossible for them to be in business.
3. Perhaps you live in one of Connecticut’s many wonderful towns with a vibrant but quaint downtown and you “Love Your Local.” Supporters of this legislation would have you believe it will help preserve the local Main Street, which makes your town a great place, by forcing online sellers to charge the same sales tax customers pay when they shop in person. This bill will have the opposite effect. That’s because most of those local businesses that have survived this past decade have done so because they are innovators.
Take DelMonico Hatter for example: It has been in New Haven for more than a century. Or ToolsPlus, a Waterbury hardware store that found a way to survive when Home Depot opened across the street. These fine businesses are able to maintain their local stores because they’ve grown their presence nationally by selling remotely, offering selection or service, or both. The big guys just can’t match them.
That ability to remain viable would be threatened by a requirement for all businesses that sell remotely, no matter how they sell and no matter their size (and a $1 million in annual revenue exemption is so low as to be virtually zero), to become tax collectors for all of the country’s taxing jurisdictions. Each tax jurisdiction not only has its own rates, but also its own rules about what is taxable and what isn’t, plus varying tax holidays. Having the computer equipment and personnel to handle this extraordinary taxing process would add substantially to the cost of doing business.
In addition, all sales tax states can audit any company that sells out of their state at any time — even those companies that don’t sell to consumers. Business owners could be overwhelmed by audit requests, costing more time and money.
And, if you pay by check, it requires that you must be able to figure out the tax based on the local rules and rates of wherever your package will be shipped.
My business and those in the Connecticut Small Business Preservation Alliance have no problem collecting sales taxes from out-of-state customers. But to make the marketplace really fair, Congress must reject this bill and instead create nationwide standards for what is taxable, require one rate per state, create one tax return, develop uniform tax holidays and allow audits only by the home state.
The Senate never vetted this bill, so the House must. Not only may terrific Connecticut businesses like ours may be wiped out, but so too may be the entrepreneurial economy, our lovely Main Streets and your true choices as a consumer.
Terri Alpert is the founder and CEO of North Branford-based “catalog” brands Uno Alla Volta and The Artisan Table, and a co-founder of the Connecticut Small Business Preservation Alliance.