RE:All Your Tax-Free Internet Shopping Is About To End

From the Business Insider we have this article about the demise of tax-free Internet Shopping.

"Supporters of this online sales tax bill are trying to muscle it through before senators find out how disastrous it would be for businesses in their states," Ayotte said. "I will fight this power grab every step of the way to protect small online businesses in New Hampshire and across the nation."

Baucus said the bill would require relatively small Internet retailers to comply with sales tax laws in thousands of jurisdictions.
"This legislation doesn’t help businesses expand and grow and hire more employees," Baucus said. "Instead, it forces small businesses to hire expensive lawyers and accountants to deal with the burdensome paperwork and added complexity of tax rules and filings across multiple states."

But Sen. Dick Durbin, D-Ill., said the bill requires participating states to make it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don’t have to send them to individual counties or cities.

"We’re way beyond the quill pen and leger days," Durbin said. "Thanks to computers and thanks to software it is not that complex."

As a computer professional and a person who has tried to figure out which sales tax numbers to use in Ohio, I am skeptical that we can implement this system without a lot of small business pain. Here are some of my questions:

  1. If participating states are providing software to help retailers calculate sales, does that mean I will have to integrate fifty different sales tax calculators into our online order entry system so that I can show the customer the correct sales tax when they are checking out? Yes, Senator Durbin, fifty different sales tax calculators destroys productivity as much as going back to a quill pen and ledger. In a perfect IT world I would use a single number for the entire state and I would not have to worry with county and city taxes or exempt products. Getting the states to agree to a generic sales tax like this is probably like herding cats.
  2. I assume the states will want the sales tax to be paid monthly with annual reconciliations. This may not be that hard for Amazon but for our small business with a part time accountant this could be a lot of extra work that contributes nothing to the bottom line. If a part time accountant makes a mistake on one form, that is a problem. If more than one form has a problem, that is an accounting disaster and it may take a full time  accountant to fix the problem. Now just imagine if a state wants to audit your books. Multiplying the opportunity to fail by 50 does not sound like a plan to encourage and grow small businesses.
  3. If we had a test environment it might be interesting to see if small businesses opt to not sell merchandise in certain states or set up sales tax exempt subsidiaries.
  4. If you opt to pay sales tax electronically, you will have fifty or more userids you will need to keep up with. This problem could be reduced with a national clearing house organization to consolidate payments and record keeping but I don’t see that in the law.
  5. If you are a small business exempt for sales tax collection and you market  some of your products through Amazon, are you required to collect and report sales tax because Amazon is required to collect and report sales tax?
  6. If the legislators were serious about this internet tax, the legislators should convince Amazon and Google to take the lead with an open source project to standardize the code used for sales tax calculations and reporting. Amazon and Google have a lot of small businesses as customers and it would be nice if we came up with the same sales tax for an order. Small businesses view the changes required to support an internet sales tax as all risk and no reward. For those who believe in the law of unintended consequences, there is an incentive for a business to stay small so they can stay tax exempt.