Online Sales Tax Approaching, Could Be Troublesome For Small Business

Small business owners who do part or all of their business online may want to be aware of a law that is now approaching a vote in the U.S. Senate which would impose a sales tax on purchases made online.

The Marketplace Fairness Act could be voted on as soon as early May, and would make it so that businesses of any size impose a sales tax on all purchases made online equal to that imposed by the state from which the order originated, according to a report from the Washington Post. It is believed by many experts that this law, if passed, will be especially burdensome for small businesses in particular because of the significant cost that is expected to come with setting up the systems necessary to impose these levies. In some cases, it's believed that they could cost thousands of dollars.

However, it's important to note why and how this law would be implemented, the report said. First, it would only be applied to companies with more than $1 million in revenues yearly. Moreover, it's believed that such a system would generate some $11 billion annually in tax revenues for both state and local governments.

Experts say the law would be overly troubling for many companies which are just on the cusp of reaching the $1 million threshold because in many cases, it may be extremely difficult to set up such systems, and could then not be an issue if they do not meet that limit, the report said.

"My concern with this topic overall is the operational support, and the complexity it requires online," Pranav Vora, who owns a Washington, D.C.-based menswear company doing 90 percent of its business online, told the newspaper. "The site would have to account for different sales taxes in each state if the law were passed, and each state has different laws for which items are taxable. It's just one more thing for a small company [to deal with]."

Small business owners looking to expand their companies' reach into the online world should look into the cost the new law would have for their firms, and consider the ways in which it would affect their bottom lines. Recently, many small business insurance policies are now growing more costly, and coverage including general liability insurance could be quite burdensome on top of everything else.