Sales tax collection becoming big burden
by Small Business Tax News
April 2006
(Link to Article)
Small businesses engaged in e-commerce are facing an increased tax collecting burden, according to a recent survey. Collecting sales tax has even started to impact hiring decisions for some small firms, the survey found.
The survey, conducted by Avalara, a leading online sales tax solution provider, questioned 12,000 small and mid-sized business owners and operators who are active in e-commerce. Collecting sales tax was seen as an unwelcome operating cost or other problem by 72 percent of those surveyed, while just 21 percent had no issue with collecting sales taxes, either online or off-line.
The cost of collecting sales tax impacted hiring plans for 39 percent of those surveyed. Avalara said there are 8,000 sales tax jurisdictions in the U.S. with more than 1,000 rate changes imposed by states and local jurisdictions each year.
In 2005, 42 percent of those surveyed saw an increase in their role as involuntary tax collectors. Rory Rawlings, Avalara’s founder and chief tax automation officer, attributed part of the increase to states trying to get a bigger piece of the sales tax pie.
“Part of this increased sales tax collections activity merely reflects the states’ more aggressive tax auditing and collecting efforts, which have been ramping up in recent years as states scramble for a piece of what some estimate is a $20 billion sales tax windfall,” Rawlings said in a statement.
However, Rawlings also suggested that the increased tax collection burden is due to the recently enacted Streamlined Sales Tax Program. The SSTP, a multi-state agreement providing for simplification of the nation’s varying sales tax laws, became effective in October. Avalara said this “stealth” tax could develop into something that would disproportionately impact small businesses.
“We were not surprised to see the market expecting an increase in online sales tax collections – clearly, the implementation of the SSTP program is already having an impact – nor were we surprised to learn that e-commerce businesses are not eager to take up the role of de facto state tax collectors, though most seem to be resigned to doing so,” Rawlings added.
More than half, 55 percent, of those who responded, did not feel it was fair for out-of-state taxing jurisdictions to expect them to collect sales taxes. v
Reprinted with permission of Small Business Tax News, Copyright 2006, 1-301-951-1240. This information is distributed with the understanding that the editor and publisher are not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.
Reprinted from Central Vac Professional April 2006
