RTPA: A hidden tax on small businesses

Our family owns and operates Touch of Class, a Huntingburg, Indiana-based catalog and online home furnishings retailer.  We started this business because we wanted to help people across the country make their house feel like a home.  But today, the health and well being of our business is being threatened by legislation in Congress that, if approved, could create enormous compliance costs, the risk of an intrusive government audit, the risk of litigation, and all-around endless complexities. 

This bill, known as the Remote Transactions Parity Act (RTPA), aims to find a way forward on a fair and reasonable system for collecting Internet Sales Tax.  But in reality, it’s a bad bill that should be stopped.

{mosads}For starters, the legislation offers businesses like mine the promise of “free” software to help comply with the law. But this software comes with great complexity, huge costs, and it increases the risk of government audit.

RTPA mandates businesses like ours to use software to help comply with the complex web of state and local tax laws. One example of this software is TaxCloud, which in theory handles the calculation, collection and filing involved with sales tax compliance.  But in reality, TaxCloud creates huge burdens for small businesses like ours. First, we would need to pay an e-commerce provider as much as $25,000 dollars to add tax identification codes to our existing data system. Next, we’d need to pay up to $35,000 for an outside programmer to modify our order processing system. We would be responsible for accurately setting the tax identification code on each of our 15,000 products by studying each tax jurisdiction’s tax identification code regulations.

So far, we’re up to $60,000, but that’s just the beginning. Our order management system was written in an older programming language, so it’s unclear whether modifications to the system are possible. If they aren’t possible, we’d need to replace the system entirely. I’ve collected quotes for a replacement, and they range from $150,000 to $500,000.

Compliance with the bill would also require us to devote staff to data entry and due diligence regarding tax holidays and other special details. We’d also have to spend time double-checking the software handling of returns or exchanges.

Finally, language in the bill opens the door to intrusive government audit from any one of 46 sales-tax states.

In the face of this awful bill, we were pleased to learn that House Judiciary Committee Bob Goodlatte (R-Va.) is exploring an alternative approach that would be a streamlined and straightforward way to apply sales tax to online purchases.

The aim of the Internet sales tax is to create a level playing field, and we have no problem with this goal. The Goodlatte alternative achieves this without creating new costs and new problems, while RTPA does not. 

As a small business, we work day and night to put out our catalog every month, fulfill orders, answer customer service inquiries, and help our customers in every way possible.  But RTPA would force us to spend an inordinate amount of time and energy complying with the tax laws of jurisdictions across the nation, which certainly won’t help us build our business or serve our customers as effectively. 

We urge members of Congress to seriously consider the Goodlatte approach, which allows us to focus on our customers, rather than pay tens or hundreds of thousands of dollars on implementing tax software. Small businesses like ours don’t deserve to be ambushed by hidden costs.

The Bell family owns and operates Touch of Class, a Huntingburg, Indiana-based catalog and online home furnishings retailer.