Enzi-Alexander Sales Tax Legislation: Huge Compliance Burdens

In prior blogs, we’ve discussed our concerns about the Main Street Fairness Act and the Marketplace Freedom Act and how any increased compliance burdens may be imposed on many small businesses.


We understand the concerns of many states that they are losing tax revenues due to the failure of purchasers to voluntarily file and pay use taxes on out-of-state purchases.  But the problem is not that businesses need to be “cracked-down” on because of some failing; the cause of the problem is that the states have been unable to enforce their existing use tax collections with their own citizens.  Because of the state’s inability to enforce their own laws, they now seek to move this burden to businesses.


But while we concede that there should be some middle ground here, we must balance the states’ need to collect sales taxes with the compliance burdens that would be foisted onto small businesses.  For some small businesses, the compliance costs would be just too high and would force those businesses from participating in interstate commerce.


Earlier, we had taken issue with the failure of the Main Street Fairness Act to specifically define which small businesses would be exempted from this reporting burden.  Now, we see this criticism has been addressed in the Enzi-Alexander bill, which includes a specific small business exemption for businesses with annual sales of less than $500,000.  Unfortunately, this $500,000 is unrealistically low and completely misses the mark.  As written, the legislation would require a small business that has $500,000 or more in sales, even if only $10 of that results from remote sales, to collect and remit sales taxes from foreign states.  This legislation says to any small business that if you want to grow your business through interstate sales and services, you must first learn the sales and use tax requirements and file quarterly reports in each of the states where you have one customer.


Clearly, this is the wrong step, especially in the current climate.  The compliance burden for many small businesses would be too high.