655 W. Grand Ave. Unit 140
Elmhurst, IL 60126
Dear President O'Bama and Congress and Senators:
I named this blog post, "I am...Small Business" in honor of those great commercials put on by Universities showing how their students graduated and did great things. Plus I think it is an accurate title for me, I own a Small Business. Depending how what definition of small business you use, I am really more like a micro business. We are not likely going to hit the $20 MM or $30 MM limits that many large government organizations still classify as small business.
We are just big enough though to be affected by the pending legislation called the Market Place Fairness Act. What a great name, it should be called something like - Big Business is tired of losing about 17% of their business to Small Online Retailers Act. Let's be honest where is the money coming from to lobby and get this done. It's big business plain and simple.
My company does not exist because we are cheaper than the local small business sporting good store. Heck I don't think there are many small business sporting goods store out there. I can remember growing up going to see Len the owner of the store and getting my First Basemen's mitt. I still have that mitt and most times I put it on, I remember that day going to get it. That simply does not happen now. When I need sporting goods equipment, I go to a big business to buy it. There really are not too many options at least in my area. Big Business has crushed Small Locally Owned Companies.
Now back to how we compete. Well those big businesses don't carry the breadth of inventory we carry in our warehouse/store. It's that simple. Plus we take care of our customers, ship it fast, and take care of their problems. We don't have a very complex phone system with press #1 to talk to Customer Service, #2 for accounting, if someone is available, we pick up the phone. Many people are surprised when I pick up the phone that they are talking to the owner.
Let's get back to this tax situation. Would it surprise you that many states already have a use tax? That people should be paying that tax on their state sales tax return. Would it surprise you that when Amazon sales become taxable, that it is estimated that only about 17% of e-commerce transactions will be un-taxed. How much money are these governments going to collect per person? Well my math might not be perfect but it will be around $6 a person. Or about $20 per household. I know when I did my State Sales tax return, I just paid the safe harbor amount and it was over $20. So Illinois is not going to collect more from me. To be honest, I am a licensed CPA, so I almost always look to pay sales tax on the transactions I do online. I don't want to risk my CPA license to save a few buck on taxes.
If you want to check my math, I averaged the use tax of states - comes to about 5% almost exactly, there are around 114,000,000 households and over 300,000,000 people in the USA.
So why not try to collect the $6 from everyone of the 300,000,000 people? Well why do that when you can have approximately 10,000 e-commerce companies collect it for you. Then as a thank you tell them you are going to audit them. And if you do something wrong, they will have to pay penalties and interest. And as another thank you, give them as little as 90 days notice that they need to start collecting these taxes.
Here are some ideas for the states to clean up their finances.
1) Eliminate pensions. All pensions. There is a reason the Fortune 500 company my dad worked for decided to switch from a pension to a 401 (k) plan. The pensions cost too much.
2) How about supporting the teachers? Does it really make sense for a teacher who makes $100,000 a year to be grading papers? Why not do what the large accounting firm I did during tax time. Hire interns to do data entry or other tasks like photo copying or other administrative tasks. Have junior teachers or assistants that make $35,000 a year help grade papers. Then those interns, junior teachers or assistants after a few years could become full fledged teachers. It's just a complete waste of money - the teachers time is valuable.
3) Help small businesses out and have the teachers work 12 months a year. See point #2 and give them support so they are not working 45 to 60 hours a week during the school year. We have to figure out what we are doing with our kids during the summer once again. It's going to cost us money to either put them in camps or have staff work the hours my wife or I will miss taking care of our kids.
4) If you do pass this act, give us a year's notice. Allow someone to figure out a cheap way to get in compliance. Have all sales online or via catalog or phone or even sold in store a flat rate. Say make them all 5% on everything. Make it simpler for us to comply. BTW, are you going to have every traditional retail store ask for ID and have the retail stores collect their sales tax depending on what city they live in? That is what happens here in Chicago when you buy a car. I suspect the brick and mortar stores won't have that to worry about. I guess those retailers have better lobbyists than us!
5) Give us a credit, yes I said a credit for any expenses associated with collecting these taxes. I have heard $40,000 to build a system and to comply. I bet that number is not that far off. So let us pay $40,000 less in Federal taxes and let us carry it forward or better yet make it refundable.
6) Go after big business for their lack of paying corporate income taxes. Don't allow them to transfer profits to Ireland or Switzerland almost tax free on profits made here in the Good Old USA. There is a lot more money there than there is on this sales tax collection. Companies set up entities in these countries with very few employees with the sole purpose of them saving corporate income taxes. Why isn't this ever discussed? Again Big Business, Big Lobbyists, Big Government.
7) This last one just bugs me and it does not really relate to the sales tax thing. But why can't I as a Small Business Owner save like if I was an employee with these Big Businesses. I don't have the money or even the staff to justify having a full fledged 401 K plan, I have an IRA plan for my wife and I. We can only save $5,000 a year (so $10,000) between the two of us. Why not help Small Businesses and allow us to save what people can put away in a 401 K plan? Why are we being penalized for being a Small Business.
Small Business Owner