This is a letter I have recently sent to Representative Paul Ryan of Wisconsin's 1st Congressional District:
May 6, 2013
Representative Paul Ryan
I would like you to NOT vote for any Internet sales tax such as H.R.684. Smaller retailers will be hurt due to the complex tax codes and numerous jurisdictions (around 10,000). This will not create a more level playing field, but attack the small businesses we need for job creation. $1 million in sales is not all that much. With competitive pricing and shipping costs, gross profits may be under $250,000 and net profits could be much less. Clearly with drop shipping such a company could be a one person operation that will need to manage thousands of tax forms or pay expensive fees to others to do it for them.
The states cannot come together to agree what is food for goodness sake. Businesses will need to have multiple different tax categories for virtually everything they sell. For example, a Snickers bar is a sugary confection and is obviously candy, right? Maybe not for some states will note the peanuts in it and call it a food item. So, the simple definition of the item is not simple at all. Plus some states will tax food and others may not.
My experience in Wisconsin alone offers a glimpse of how complex this will be. I have a very small IT consulting business. I can drive in southeast Wisconsin and northeast Illinois which provides me with 5 different taxing jurisdictions. Illinois does not tax labor while Wisconsin does. Sounds simple, but wait! Each of the 4 counties in Wisconsin I have served has a different tax rate. Walworth has only the state sales tax. Kenosha adds in the county sales tax. Racine omits the county tax, but gets hit for the stadium tax. Milwaukee has both the county and stadium taxes. Wow, but not too bad you may say.
Oh but there's more. When I resell software which is prepackaged it is taxable, but if I custom write some code it is not. Then, we have the issue of where the PC resides. If, I replace a hard drive in a person's desktop PC, it is taxable labor. Yet, when I replace it in a PC used to automate a home and that PC would be sold with the home, it is not taxable. It gets more enjoyable still when I have to break out the time I take to back up and restore the data on those hard disks, if for personal use as data services are not taxable in Wisconsin.
I would love to expand into Internet services, but the fear of this type of law makes me reluctant. Extrapolating the complexity to 10,000 jurisdictions is mind boggling. If I was already in that type of business, this bill would be making me take a break from this letter to go vomit. It would be that scary! Small businesses without multi-billion dollar budgets cannot cope with this burden.
If the concept of a sales/use tax is where the item will be used, then I feel this is not fair at all for the brick and mortar stores will not be required to ID all their customers to be sure they actually reside in their state. They get the privilege to “assume” the tax should go to their local tax jurisdiction, but what if a tourist buys a big ticket item to take back home with them? I understand states lose revenue, but if a business is not within its borders, it is a compliance issue with their residents, not that of the business. Businesses will be forced to comply with complex rules, collect taxes, get fined for errors and much more without any representation in those states. It is simply wrong.
Brick and mortar stores have many benefits which online retailers do not have like the ability to provide immediate sales and to have product samples available. Online retailers have the burden of having to charge shipping on top of the price of the product or service. Let's just admit each business model is unique and leave both alone.
I also feel most state governments are spending too much money. Finding additional revenue for them provides incentive for them to continue their foolish behavior.
Just vote NO on Internet sales taxes! They are a burden to small businesses. They are immoral to apply to out of state businesses.
7616 – 33rd Avenue
Kenosha WI 53142