Tax legislation unfair to small businessesPublished 12:37am Tuesday, March 4, 2014
By Tom Rath
This week, Congressman J. Randy Forbes and his colleagues on the House Judiciary Committee are gathering in Washington, D.C. to discuss Internet sales tax legislation.
As the owner of Rock Bottom Golf, a Suffolk-based business that sells golf equipment to customers across the country, I urge Congressman Forbes to use this hearing as an opportunity to examine how proposed legislation would negatively impact small businesses in his own backyard.
The current bill, formally known as the Marketplace Fairness Act, would impose unfair tax collection burdens on small business owners who sell over the Internet, making it difficult to keep our doors open.
Ten years ago, I left my job at IBM to fulfill my lifelong dream of starting my own business. I am thankful that the Internet has enabled me to substantially grow my business by reaching countless new customers. Unfortunately, my concerns about the MFA have left me in a holding pattern.
I was planning to expand my inventory to include outdoor hunting and fishing equipment, but I am afraid that if this legislation is passed, my revenue will severely decline, and I will no longer be able to serve my customers.
Supporters of the MFA are aiming to put my small business in the same category as a large national retailer. Retail giants like Wal-Mart and Best Buy have locations across the country, and it makes sense that they must comply with the tax laws where they operate.
They have the capability to hire accounting departments to manage the complex collection and auditing process. For small business owners like me, this burdensome task would dominate my time, and I simply cannot hire full-time accountants to handle these requirements while still making a fair profit.
Similar to any “Main Street” retailer, I am responsible for collecting sales tax from my customers in Virginia. That is where my warehouse is located, and I am more than willing to collect the state sales tax. Yet this bill would require me to collect sales taxes for tax jurisdictions thousands of miles away. This is just not feasible for me and my small staff.
There are more than 9,600 tax jurisdictions in the United States, and I would be accountable to every jurisdiction where I make one sale. With taxation also comes the possibility of tax audits and costly litigation, which could be crippling for small businesses operating on small margins.
The current version of the MFA would exempt small businesses with less than $1 million in annual out-of-state sales, but this exemption is not adequate. Anyone with a retail background understands that sales are not the same as profits.
My business falls above the threshold, but I am far from what should be considered a “big business.” The profit margin I earn is used to purchase inventory, pay employees and pay my family’s living expenses.
Instead of hastily passing a law that will make it harder for small businesses to operate, the government should be focusing on policies that enable us to grow and compete.
This week’s hearing should be the Judiciary Committee’s first step in conducting a robust analysis of how the MFA would harm our nation’s small business owners and identifying best practices to support our growth.
Tom Rath is the owner of Rock Bottom Golf in Suffolk. Email him at Trath@rockbottomgolf.com.