Senator Hassan Calls for Answers on Wayfair Sales Tax Compliance Software, Impact on Small Businesses

WASHINGTON – U.S. Senator Maggie Hassan (D-NH) led a letter with Senators Jeanne Shaheen (D-NH), Ron Wyden (D-OR), and Jeff Merkley (D-OR) to tax compliance software companies about the affordability and accuracy of their products, which many small businesses use to comply with the Supreme Court’s problematic Wayfair decision. Two years ago on June 21, 2018, the Supreme Court’s Wayfair decision required businesses – even if they are located in non-sales tax states – to collect sales tax for other states and jurisdictions, creating a burdensome new tax collection system that small businesses are struggling to comply with.

The Senators’ letters discuss how – especially amid the COVID-19 pandemic – any inaccuracies with these software products could be especially harmful to small businesses, and the software itself can be unaffordable. The Senators are sending the letters to Sovos Compliance, TaxJar, Thomson Reuters, Vertex, Avalara, Bloomberg, and PricewaterhouseCoopers.

“As more commerce moves online and small businesses continue to face enormous challenges during the COVID-19 crisis, we urge you to clarify several outstanding questions regarding the affordability and accuracy of your products,” wrote the Senators.

The Senators discuss the extreme difficulty small businesses face in navigating the wide variety of complex standards across the 10,000 different sales tax jurisdictions in the U.S. Unfortunately, in addition to these challenges, small businesses often struggle to afford software to help them comply with these standards, and have concerns about facing onerous tax penalties if these software products make mistakes. “We share these small businesses’ concerns about the high costs of software products that purport to help these small sellers satisfy their obligations to collect and remit state and local sales taxes. Further, we are concerned about small sellers’ exposure to financial liability if and when sales tax compliance software makes errors in calculating sales tax collection obligations, or otherwise uses inaccurate information regarding divergent state and local nexus standards, sales thresholds, tax bases, tax rates, or filing requirements,” wrote the Senators.

The Senators are calling for answers from software companies on the typical cost of their products, potential errors made by the software, and what the companies do to ensure that small businesses are not liable for any software mistakes.

Senator Hassan has been a leader in efforts to try to reverse the Wayfair decision and protect New Hampshire small businesses from mountains of new red tape. Senators Shaheen, Hassan, Wyden, and Merkley have reintroduced legislation that would stop states with a sales tax from creating red tape for small businesses as a result of the Supreme Court’s Wayfair ruling. Senator Hassan has called on the Senate Finance Committee - on which she serves - to hold a hearing on how the Supreme Court’s ruling in Wayfair will affect small businesses. Senators Shaheen, Hassan, Wyden, and Merkley also joined Senator Tester in reintroducing the Stop Taxing Our Potential (STOP) Act to overturn the Wayfair decision.

You can read the Senators’ letters here.

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