How We Can Level the Playing Field for Small Businesses

On too many issues, small businesses face an uneven playing field. From access to capital to taxes, our laws tend to favor large corporations at the expense of entrepreneurs. The reality is that big companies have resources to spend on lobbying and wooing lawmakers, which means that they’re often included in policy conversations while small business owners aren’t. And that’s bad for our economy, because it results in policies that stifle small business growth and entrepreneurship.

Right here in Missouri, one of the biggest issues facing local brick-and-mortar business owners is the online sales tax. Due to a 1992 Supreme Court ruling, Internet retailers do not collect sales tax from customers where the retailer has no major physical operation. Instead, Internet retailers’ customers are supposed to report their online purchases in their tax filings. Few do, causing states to lose an estimated $11 billion every year. Missouri missed $358.3 million in state and local sales tax revenue in 2014.

While some states have partially rectified this issue through statewide legislation, Missouri has not. This creates a real competitive disadvantage for Missouri’s brick-and-mortar retailers – like small restaurants, bakeries and bookshops – that are required to capture sales tax. It also accentuates the advantage that massive online retailers wield over small businesses.

Thankfully, there are legislative options at the national and state level to level the playing field on online sales taxes. At the state level, Senator Wayne Wallingford (R-District 27) has sponsored Senate Bill 795 for the 2016 Legislative Session. This bill would enact a streamlined sales tax collections mechanism for Missouri, which would simplify Missouri’s sales tax laws to make it easier for online retailers to collect and remit state and local sales and use taxes. This legislation would allow Missouri to collect an additional $15-$20 million in revenue in the first year of implementation – and it would help provide parity between online and brick-and-mortar businesses.

Nationally, Congress is considering the Marketplace Fairness Act (MFA), which would allow states to require online retailers to collect sales tax from customers in states where the retailer has no substantial physical presence and remit them to each customer’s state. In combination with the streamlined sales tax collections mechanism, this would ensure that both online and brick-and-mortar businesses are playing by the same rules. The MFA also has an exemption for online small businesses with less than $1 million in revenue.

If you’re a small business owner that has questions about this issue or wants to learn more, Small Business Majority will be holding educational and interactive roundtables around Missouri. Stay tuned to our events page to learn more about our upcoming events.