Joe Bishop-Henchman, Executive Vice President of the National Taxpayers Union Foundation (NTUF), testified on Wednesday, September 25, before the U.S. Senate Finance Committee’s Subcommittee on Fiscal Responsibility and Economic Growth, on the subject of providing small business relief from remote sales tax collection. In a statement for the record, Bishop-Henchman argued that small businesses face significant difficulties in complying with the complex sales tax landscape.
At the hearing, Bishop‐Henchman said:
Small businesses want to comply with America’s 11,000 sales tax jurisdictions, but struggle to do so given administrative complexity and the system’s vulnerability to states trying to take advantage of the others. The burden is surmountable for businesses that only sell in one state or for large companies that can spread the cost of compliance over many transactions. But for a small business that wants to sell everywhere, the burden can be a lethal one.
In the 2018 Wayfair case, the Supreme Court upheld South Dakota’s law requiring sales tax collection by remote sellers, but looked to Congress for further action on the issue. Little progress has been made in the subsequent six years.
The post-Wayfair sales tax landscape has both positive and negative aspects for small businesses. Most states do have safe harbor protections, but six states have tried or are trying to engage in retroactive tax collection. Perhaps most importantly, only 24 states are full members of the Streamlined Sales and Use Tax Agreement (SSUTA), and no new states have joined since the Wayfair decision.
Even if most states strive to reduce compliance burdens, a few states that break from the rest can impose enormous costs on small businesses. Bishop-Henchman praised the work of the SSUTA and argued that all states should join the pact or take significant steps to reduce compliance costs.
Bishop-Henchman concluded by arguing that “the pre-Wayfair legal and policy situation was not fair to brick-and-mortar businesses and to states. But we should make sure the pendulum doesn’t swing so far the other way that it rewards bad state sales tax administration policies that disrupt interstate commerce for all businesses. The goal should not be a leg up for remote sellers but a simpler, easier sales tax apparatus for all.”
If you’d like to discuss small business remote tax burdens with NTUF’s Joe Bishop-Henchman, please contact NTUF Marketing Director Courtney Manley at courtney.manley@ntu.org.
Photo credit: Chris Kleponis, Freelance Photographer, https://www.kleponis.com/