The U.S. government’s decision and impact on small businesses
In U.S., e-commerce businesses used to run on zero sales tax. Recently, the verdict of the South Supreme Court regarding South Dakota vs. Wayfair case has put an end to the zero sales tax policy (BBC News, 2020). Small businesses operating in the e-commerce industry has been severely affected. South Dakota earlier stated that unless businesses have a physical presence, it can be taxed. Moreover, the court documents suggest that each year, approximately $40-$50 million is lost as businesses without a physical presence were not taxed.
The Accountability Office of the U.S. Government anticipated that states lose billions in tax revenue. Thereafter, the decisions of the court regarding e-commerce and small businesses have been analyzed. As per the specific requirements, it can be anticipated that the online business owners are liable to pay more in comparison to regular business owners. The complexity for small business owners and online retailers has increased because they are now supposed to sit and analyze the 50 state laws that deal with sales tax in case the business owners are operating out of the state. Complexity will also increase because tax laws are not clear. Some states charge taxes on certain types of products and services, while other states do not charge at all. On top of that, certain states have determined their own limits and threshold values before charging taxes. Hence, online retailers are now under pressure to gain adequate knowledge about the varying types of sales tax, and they need to set aside funds as well.
Identifying the overall impact that occurred previously
The sales tax policies have violated tax principles related to efficiency, transparency, and economic growth. Economic distortions have occurred, and businesses had to pay sales tax several times because it has been imposed on them (Kamleitner, Korunka & Kirchler, 2012). For instance, at varying stages of production, distribution, and others, businesses had to pay taxes multiple times. The process of reaching up to the customers also required tax payment, and it has slowed down the economic growth of the business. In 2017, $156 billion has been imposed on B2B product sales, equipment, and services. These are additional taxes, and small businesses have been severely affected. The local or small businesses pass the taxes to the customers, and consequently, the economic activity has been negatively affected. The government should have considered the plight of small businesses as these are not as capable and competitive as large corporations.