Wednesday, November 30, 2011

US Sales on Internet Transactions Will Harm Small Entrepreneurs

Amazon today threw its weight behind a bill the would authorize US states to force online resellers to collect sales tax.  And why not? Amazon has nothing to lose and much to gain by having a sales tax requirement.  Amazon has brick and mortar fulfillment centers all over the US and is under intense pressure to collect taxes on the many billions in sales they make annually. 

As the owner of a small software company that sells exclusively on the internet, being forced to collect and remit sales tax to 50 states and DC individually would be a daunting infrastructure challenge.  This is a challenge that a brick and mortar small business would not have -- they have only one sales tax authority to collect and remit for.

Why in this debate do I not see any kind of discussion about a centralized reporting system that would bring efficiency to the collection of sales tax?  The impact of this will force small internet retailers into the arms of companies like (you guessed it!) Amazon and Apple who will gladly collect their 30%-50% cut for letting you sell on their sites. I don't know about you, but an 8% sales tax and 30%-50% reseller fee have not been priced into my business model, and would put me at a huge disadvantage to direct competitors I have in India and other places who don't appear to collect any taxes from US buyers.

I'm not completely against the requirement to collect a sales tax, as long as the 50 individual states a) don't make it a nightmare to collect and remit, and b) as long as they don't force small internet businesses to compromise their independence and profitability and c) you find a way to impose it on the rest of the world.

Its mostly the process behind the requirement and the lack of concern for small businesses that is the real issue for me.  A US sales tax seems almost inevitable at this stage; but nowhere do I see a seat at the table for small internet retailers, whose futures and independence are in jeopardy.

Lets give small internet retailers a SEAT AT THE TABLE NOW so that entrepreneurs can continue to pull the USA out of this depression.

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