Administering the Sales Tax
• Fifty-seven (57) percent of small-business owners collect and remit sales taxes (excluding those in states where none are levied). On average, sales taxes are levied on about half of their sales. Retailers universally collect them with about half of those in construction, manufacturing and services (narrowly defined) collecting them on at least some sales.
• The most frequent (54%) primary reason that 42 percent of small-business owners do not collect any sales taxes is that they sell tax-exempt services. Another 18 percent say the primary reason is that they sell to non-end-users. The remainder provides varying reasons though relatively few report sales outside their home state’s jurisdiction as the primary reason.
• Thirty (30) percent of small-business owners who collect the tax say that it could be made “a lot” easier to administer and another 24 percent say that it could be made “a little” easier. However, just 4 percent classify administering the sales tax as a “serious business problem” with another 23 percent terming it a “continuing hassle.”
• Different tax rates on different sales create “a lot” of administrative burdens for 13 percent of small-business owners who believe the sales tax could be simplified. Almost the same proportion find exempt sales creating “a lot” of problems. Thirteen (13) percent also find that distinguishing between exempt customers, e.g., a non-profit organization or a non-end-user, and non-exempt customers leads to “a lot” of difficulties. Those expressing concern about each are usually not the same owners.
• Modern cash registers appear to play an important role in mitigating potential problems caused by different tax rates and the tax-exempt status of some sales.
• The largest administrative problem for small-business owners appears created by compliance with varying sales taxes in multiple jurisdictions, particularly between state and local sales tax structures in the 30 states that allow local sales taxes. Only 19 percent of those facing state and local sales taxes say the jurisdictions have “identical” taxes for all intents and purposes, though 50 percent say they are similar.
• About 6 percent of those collecting sales taxes report that they must collect them for more than one state. Eleven (11) percent of the group has sales over the Internet.
• In the last five years, 18 percent requested at least one refund or adjustment for overpayments made. Seven (7) percent report that the requested change was “very difficult” to obtain while 40 percent reported it was “somewhat difficult.” Overpayments resulted primarily from clerical errors.
• Nineteen (19) percent report that they are allowed to keep a percentage of the revenues collected in payment for their services as “tax collectors.” But, about two-thirds of those say that the reimbursement does not cover the costs they incur collecting the tax.
• Over one in five have experienced an audit of their sales tax records in the last five years. It is also common for those not required to collect sales tax to experience a sales tax audit.
