Jun 11, 2013
CompTIA Small Business Spotlight: IT SMBs Need to be Protected from New Interstate Tax Compliance Burdens
Washington, D.C., June 11, 2013 – The Marketplace Fairness Act of 2013 introduced in the House in February, passed by the U.S. Senate on May 6 and is now being considered in the House, would require businesses to collect and remit state sales taxes on sales of goods and services made into other states. While the Marketplace Fairness Act (MFA) does contain a “small seller” exemption -- which exempts those businesses that have $1 million or less in remote sales, this approach does not address the real concerns of small business IT companies, according to CompTIA, the non-profit association for the IT industry.
In conjunction with National Small Business Week June 17-21, CompTIA is spotlighting several of the issues affecting its small business members and offering solutions to address those challenges.
For Secure Designs, a managed network services company based in Greensboro, N.C., overlapping state taxes has created excessive compliance burdens for the company.
“Our company provides managed internet security services to small and mid-sized businesses and currently manages more than 6,000 firewall appliances in all 50 states. In addition to managing firewall equipment directly for our customer base, we provide firewall services and equipment to telecom companies (ISPs/service providers). For our telecom customers, we purchase, manage, configure and ship equipment to many locations. And as a result, we are subjected to regulations that affect telecom companies – such as property, sales and use taxes,” said Ron Culler, chief technology officer, Secure Designs, Inc. “Increasingly, overlapping state tax requirements have created excessive compliance burdens for our business. As with many small IT businesses, we must both understand and be compliant with the requirements of multiple taxing authorities.”
“For us, what makes it even more complicated is that some of our customers are direct purchasers; therefore, we have to look at the state and local tax regulations applicable to that particular customer. In cases where we have a managed service provider, say in the state of New Hampshire and they have customers all around the area -- Connecticut, Vermont, Massachusetts -- my customer is in New Hampshire and their customers are all over, but I’m the one providing the service. Who is ultimately responsible for collecting and remitting any required tax?
“These scenarios pose a difficult and costly compliance burden on Secure Designs. We need to research the state and local tax laws in every municipality in every location we sell a piece of equipment or provide service. Or, we have to rely on the company we’re selling to who resides in that state to interpret the tax laws. As city and state governments search for increased revenue streams, the burden put on small companies such as Secure Designs is impractical without a staff of tax specialists tracking each municipality’s tax laws and changes. Unless you have a lot of money to do research on every location in which you do business, you just have to struggle through it. The risk is a large, unexpected tax bill. You just don’t know,” Culler said.
Ultimate Wish for Interstate Tax Compliance
“We appreciate CompTIA and TechVoice’s important role in advocating to protect small IT businesses from the one-size fits all requirements of MFA. This legislation would require our company to collect and remit state sales taxes on sales of goods and services made into other states – even if we have not office or sales force in that state,” Culler said.
“Rather than a ‘small seller’ exemption, we believe that the exemption should apply to a ‘small business’. As written, the MFA would exempt billion-dollar corporations that had less than a $1 million in sales; however, a small business with total revenue of $1.1 million would be caught up in this new requirement if $1 million of its sales were made into other states. That is, the legislation does not consider the size of the business, and its ability to absorb these new tax compliance costs; it only considers the gross amount of interstate sales.
“I support CompTIA’s position that the MFA should balance the rights of states to collect sales taxes with the ability of small businesses to cover these new tax compliance costs. We certainly agree that we should pay taxes where our office and sales people reside, but requiring us to file sales tax returns with every state where we have a single customer is just too costly,” Culler said.
To learn more about Capitol Hill issues affecting small businesses, visit www.techvoice.org.
TechVoice is a partnership of the Computing Technology Industry Association (CompTIA), the Technology Councils of North America (TECNA), and participating regional technology associations. Collectively, TechVoice represents thousands of technology companies across the country employing millions of workers. TechVoice is dedicated to empowering and mobilizing the grassroots tech community to impact legislative and regulatory issues important to growth, innovation and job creation. For more information, visit www.techvoice.org.
CompTIA is the voice of the world’s information technology (IT) industry. Its members are the companies at the forefront of innovation; and the professionals responsible for maximizing the benefits organizations receive from their investments in technology. CompTIA is dedicated to advancing industry growth through its educational programs, market research, networking events, professional certifications, and public policy advocacy. Visit http://www.comptia.org/home.aspx or follow CompTIA at http://www.facebook.com/CompTIA and twitter.com/comptia.
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