State sales tax laws are proving to be a burden to small sellers, according to testimony provided to members of a Congressional subcommittee.
On March 3rd, the Committee on Small Business Subcommittee on Economic Growth, Tax, and Capital Access held a hearing titled, “South Dakota v. Wayfair, Inc.: Online Sales Taxes and their Impact on Main Street.” The hearing focused on the impact to small firms as a result of the decision in the 2018 landmark Supreme Court ruling.
Paul Rafelson, tax attorney at Francissen Rafelson Schick, LLP, attended the hearing and said the business owners did a great job of shining a light on the tax issues Congress needs to address.
Rafelson, who is also volunteer Executive Director of the Online Merchants Guild (OMG), submitted written testimony to the committee. He described OMG as a trade association for small ecommerce sellers with a mission to advocate on behalf of members and provide them with a voice.
In his testimony, he accused some states of targeting small businesses and engaging in “goon-like” tactics:
“Some of our members have also submitted written testimony for the record, detailing their struggles in trying to comply with unreasonable state tax laws, as well as their recent experiences in dealing with states such as California, Washington and Massachusetts, all of which systematically targeted these small business owners, falsely accusing them of sales tax evasion, and illegally and unconstitutionally seeking to recover back taxes from them.
“For our members and those non-members who decided to speak and submit their testimony, I commend their bravery. But please know, that for every small business owner who submitted testimony, there are thousands who were too afraid. Too afraid to tell the United States Congress about how top officers of state tax agencies engage in goon-like tactics to shake down small out-of-state business owners for taxes that their own state laws said these businesses do not owe, nor would they owe due to longstanding constitutional precedent.”
Rafelson told EcommerceBytes he believes the committee members definitely see the problem, but said he believes there is a hold up in the house. “For a sales tax bill to go through, we would need the House Judiciary Committee to support it.” He advised sellers in New York to write to the House Judiciary Committee Chair Nadler and other members of Congress to pressure the Judiciary Committee to back sales tax legislation.
“Meanwhile, we are also in the midst of possibly getting a Senate Judiciary Committee hearing on the matter, which is hopeful,” he said. “Sellers should reach out to their Senators and let them know that this is important to them.”
Appearing before the subcommittee at the March 3rd hearing were the following four witnesses:
- Jamie Yesnowitz (Grant Thornton, LLP) testifying on behalf of the American Institute of Certified Public Accountants
- Mrs. Linda Lester, Vice President of K-Log, Inc.
- Kevin Mahoney, President and Founder of FindTape.com
- Brad Scott, Financial Director of Halstead Bead, Inc.
The House Small Business Committee streamed the hearing, available on YouTube.
Nadler? Talk about goon tactics. That aside Congress needs to address this mess.
Seems to me (as one based outside your country) that these greedy and rapacious tax entities are constantly finding new and novel ways to rip off the little guy. This has happened to me on several of the platforms where I sell, which is why I now encourage my customers to buy from me direct with no sales tax deductions.
I agree with oberon1.
I collect pay quarterly the sales tax for sales I make within my own state.
I have no control over sales taxes collected by Etsy.
I don’t sell enough product in any state that would exceed the amount needed to require sales taxes to be collected. Etsy collects these taxes anyway.
No sales tax data appears on any Etsy report. The “Tax” column remains empty. Etsy’s response: “We don’t want to confuse the sellers.”
No proof from Etsy that “x” amount of sales tax was collected and paid directly to those states.
No proof that my 1099k includes sales taxes that were no passed on to me.
No guarantee that down the road Etsy won’t begin charging me a fee for forwarding those sales taxes, when they hold those funds until they must pay the states, usually quarterly, and therefore are able to collect interest on those funds.
I would be happy to report this, with proof, to any congressional committee. I do have invoice copes from Etsy that list the taxes that were collected. I manually go through them & itemize these taxes. But I do not have proof that Etsy paid those taxes. They are not required to provide this.
I keep saying they’ve got it all backwards. Let states collect sales tax on all purchases made with businesses in their own state. If it weren’t for the business’s existence, the transaction wouldn’t have taken place and, therefore, it should be the business owner’s state that collects.
It would benefit the states just as well, but in a much simpler and fairer manner that allows each state to remain in control over its own sales tax. By allowing merchants to continue collecting for and remitting to one state, there wouldn’t be a need for expensive third-party solutions because merchants wouldn’t be much, if anymore burdened by the new requirements.
It would also completely do away with any confusion over what is and isn’t taxable for each state or any other varying sales tax laws. Of course, since they will be collecting on a lot more purchases, they should account for the excess by adjusting the filing requirements (ie, upping the number/amount of sales).
Why do they always have to make things so difficult?
Forgot to mention that a Use tax should be deemed unconstitutional and completely unnecessary if they would just get their heads out of the sand and actually put them together. If each state is collecting from all eligible purchases made within their state (whether directly or indirectly), then where would the need be for a use tax in any state because the customer is paying the tax?
Furthermore, if a merchant (collecting only for their own state) isn’t required to collect sales tax within their own state, then their customer shouldn’t have to pay a tax to any state. As it is now, I’m not required to collect for any state, yet, my customers are being charged sales tax on certain sites. What’s worse is that it’s being counted as my own income when it’s not and I have no way to prove where that extra money went because I didn’t have anything at all to do with the sales tax process being applied to my own business.
Seriously? Come on, folks…get with the program!