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Foxes in the Small Business Henhouse

The negative impact that a Streamlined Sales Tax (SST) would have on small businesses was once again the hot topic at this week’s meeting of the SST Governing Board. foxes-in-the-henhouse


As readers of this blog know, NetChoice has consistently sounded the warning bell about the huge costs and compliance burdens small online retailers would face if Congress required them to collect sales tax for all states. Thankfully, some members of Congress understand this. But most of the legislators and tax officials on the SST Governing Board do not.


Proponents of the SST acknowledge that this new tax regime will be tough on small businesses, which is why initial legislation exempted anyone with less than $5 million in annual remote sales.  But a growing appetite for new tax revenue has prompted SST leaders to shrink the small seller exemption to just $100,000 — with plans to eliminate it entirely.


Thankfully, a dose of reality by the name of Stacey Strawn came to Indianapolis for this week’s Governing Board meeting.  Stacey is a small business owner – and NetChoice member – who owns   She employs 10 folks at her operation on Main Street in Waynesboro, Virginia.  In addition to her store sales, Stacey does nearly $3 million in online sales to customers around the country.


On three occasions during the meeting, Stacey rose to remind the Governing Board how incredibly complex and costly their so-called simple system was for a small business like hers.


In one amazing exchange, Stacey presented her programmer’s estimate of $15,000 to adapt her computer systems to use the SST’s ‘free’ rate and filing tools.  Stacey explained how that cost will be $14,000 higher than the allowance the Governing Board was thinking about giving her.


The response she got from one Wyoming state legislator? “Then stop selling remotely.”


To which Stacey replied, “… then I’ll lay off 8 of my 10 employees.”


The conversation highlights what’s at-risk should Congress allow cash-hungry state governments to impose an additional tax regime on the nation’s small online retailers.  Since the beginning of their quest to turn businesses in other states into remote ATMs, state tax collectors have continuously decreased protections for small businesses while simultaneously increasing the complexity of the oxymoronic “Streamlined Sales Tax.”


Even more concerning is the fact that SST advocates are not willing to accept a specified small business exemption in Congressional legislation.  The Governing Board wants to set the exemption level, and they’ve openly declared their intention to eliminate the exemption once Congress is out of the picture.


But really, who is surprised? The SST is a project managed by tax collectors whose goal is to maximize tax revenue. While they pay lip service to reducing small business tax and compliance burdens, their hearts just aren’t in it.


Nor will small business get much sympathy from giant retailers who have supported SST from the outset.


For decades, Main Street retail has been getting clobbered by big-box stores and national chains. To survive, many small retailers created web stores to serve repeat customers and to find new customers across the country.


Then the big retailers added expansive websites of their own, and gave customers the convenience of doing pickups and returns at their local stores.  Small sellers like Stacey can’t afford to open stores in every town. That’s yet another advantage for big retailers, along with negotiating much lower rates for shipping, inventory, health insurance, etc.


Ironically, the SST is good news for big-box retailers with websites.  After all, even a smidgen of simplification helps when you already have to collect tax in every state.  But SST will undoubtedly raise costs and prices charged by small businesses that compete with the big boys.


When you hand the legislative pen to foxes like these, all small businesses are right to be wary.