Small businesses are also dealing with the impact of 2018s Supreme Court ruling, in this case south dakota versus wayfarer. In the wayfarer decision, the courts gave the greenlight to Small Businesses becoming Tax Collectors when they sell online. Collecting taxes for states even where businesses had no brickandmortar presence. Small businesses had never been responsible for this kind of tax collection before. Almost immediately after the ruling came out, state states across the country became began passing these laws. Speaking out alongside them were those in New Hampshire, montana, also states without sales tax. That is why montana senator has been a leader on this issue. But its not just the burden of states without sales taxes. Its a burden for Small Businesses everywhere. Let me repeat that. It is a burden for Small Businesses everywhere. Sales taxes in america are very complicated. 45 states and different localities have different tax rates, different tax definitions for taxable product. In illinois you will pay sales tax on a twix bar, but not on a snickers. If you take up sewing in new jersey, you will not be able to do your sewing without confusion, yarn purchased for our projects gets taxed, but yarn for sweaters is taxfree. After the wayfarer decision, Small Businesses are on the hook for navigating that complex task. My view is, as long as the wayfarer ruling stands, congress often congress should step in and get relief to these Small Businesses that are really hurting. That would start with exempting Small Businesses that have revenue under a certain threshold. Congress ought to create standardized rules for states outside of their borders. That is what we thought to accomplish when we introduced the online sales complicity and sales act. My belief is that we will see increasing numbers of organ Small Businesses oregon Small Business is taxed over liabilities that they cannot dispute. Oregon and other states will not be particularly interested in helping our residents move forward. Our point is that Small Businesses have plenty of challenges today just keeping their doors open. They should not have to spend on sales Tax Consultants and software. This is an opportunity for us to lower the cost of Small Business and reduce their headaches. Again, i want to thank the senator for her leadership, she has discussed this issue with me many times. I want to thank the witnesses for joining the committee today. Thank you mr. Chairman, welcome to our witnesses, thank you for being here today. The Supreme Courts 2018 wayfarer decision significantly changed the landscape first dates and online businesses. Post wayfarer, states can require Online Sellers to collect and remit sales taxes from sales tax states. It creates challenges for public and private sectors to evolve with commerce. The share of commerce conducted online has increased due to tackle no logical technological innovation. Covid19 and the pandemic have fueled this increase. Buyers are no longer limited to brickandmortar retailers in their physician 80. In their vicinity. As wayfarer acknowledged, it put Small Business at risk for collecting sales tax. State governments were losing out on billions of sales tax revenue as a result of online sales in the prewayfarer environment. Many states and municipalities rely on sales tax revenues to fund essential services. In fact, 45 states and the district of columbia impose taxes on remote sales that and 32 states, the sales taxes account for more than 1 5 of total state and local tax collection. In 11 states, general sales taxes account for one third of total tax collection. By allowing to notably it does not result in the sales tax being imposed on residents of nonsales tax state. However, in light of states expanded rights and sellers rights to new access. Small businesses in particular face new responsibilities and challenges. The difference hundreds of threshold between states and localities can create a burdensome and complex system that can make business difficult for Small Businesses. Sellers must now learn to comply with the myriad of checks Tax Jurisdictions where there consumers reside, or higher Tax Consultants. This can be timeconsuming and expensive for Small Businesses who do not collect sales taxes but must remit sales taxes to other state. With the attempt to ease these burdens, a comprehensive solution to this problem remains evasive. The right of states to levy taxes and to empowerment into polities to do the same is wellfounded founded on the principle of sin eight sovereignty. On the other hand on the principle of state sovereignty. On the other hand, there must be a balance struck between states collecting sales tax due and ensuring that Business Activity is not stifled, particularly as the risk of recession rises. They should be able to collect taxes due, and remit them to Relevant Authority with minimal headaches. More consistent thresholds and standards would allow businesses to more efficiently comply, and reduce the risk of future audits and penalties. Our the post wayfarer landscape. I look forward to hearing how congress could play a role in creating a less burdensome approach. Thank you. Thank you thank you senator. He first joined jal in 1990 one and we have appreciated working with him in the past, the second witness is thank you Ranking Member crapo for holding the hearing today. And id like to thank you for being here to testify. This is the ceo of littleton coin company. They are a retailer of collectible coins that sells in all 50 states. The company employs 270 five people in the community and is one hundred percent Employee Owned to a Employee Stock ownership plan. John has been with the company for 15 years and as we will seen as we will see from his testimony he has seen a significant burden that states have imposed on Small Businesses along the wayfarer decision. I look forward to hearing from you today. Thank you. I would like to recognize the senator to introduce her. Thank you. It is my distinct honor to introduce a shell who is the founder and ceo of compression leg were leg where vim and vigor compression leg where. They sold 750,000 pairs of compression socks locally. She is currently working on in on a venture called shop. She earned a ba from the university of chicago economics and mba from the Northwestern School of management. We are proud to have you here. Thank you for being here. We all look forward to your testimony. Thank you senator. Our fourth witness, mr. Johnson has been an executive due to rector streamlining sales, an executive director streamlining sales. Mr. Johnson has been involved with the streamlined sales tax project since 2006. Our sixth witness is the president of sales tax consultant and technology firm. She is also the founder of a Sales Tax Institute which allows which provides classes for Small Businesses to comply with sales tax. She was a professional with Quaker Johnson with quaker oats, johnson johnson, we are very glad you are here. Mr. Mckee, it is your turn to start us off. I would like each witness to take five minutes or so, we will put their remarks in their entirety and are congressional transcript. Go ahead. Thank you for the opportunity to discuss the work on remote sales tax collection, including states and business experiences. Sales tax are important to our states it accounting for one third of all sales tax on all collected red new. Tax revenue. States move quickly to put in legal requirements for remote sellers. Our current work has determined that 45 states have required collecting sales tax based on whether local taxes apply. What these variant d sheet these variations add to the burner for businesses. For example, the collection and remit in the collection and remit requirements vary significantly. More than a dozen states have root have adopted requirements in the months leading up to this Supreme Court decision, these laws went in effect immediately or soon after. Another factor that businesses still need to contend with, there are thresholds that exempt many businesses from remote sales tax requirements. There are also types of sales that are in local sales tax creates another lay another layer of complexity. While alaska does not have a statewide sales tax, it has local taxes. In some states, only certain jurisdictions may impose a sales tax, while in others, a broad range of jurisdiction such as counties, municipalities, and various local authorities can impose a sales tax. It is estimated that 30,000 jurisdictions have the authority to impose sales taxes and between 10 and 12,000 actually do so. In 2017, we estimated that if given expanded authority, states could give an average of 200 Million Dollars in revenue with larger states giving more than 1 billion annually. This spring, sales tax states were surveyed in the district of columbia. 30 states reported remote sales Tax Collections totaling about 20 billion for representing about 41 of collections under the new laws. In our prior work, we have identified three areas of costs that businesses encounter related to sales tax collection. Software caused, audit costs, and costs associated with research and liability. In our ongoing work, businesses confirmed that they encounter cost and all of these areas, including Software Related costs. Purchasing software is required in navigating the complexities of local sales tax collection. Businesses must apply tax rates, collect taxes and send certificates. Regarding the second category, audit and assessment costs. Businesses confirmed that statelevel audits are taking place at that they have spent substantial resources responding to these audits. As we heard in our earlier work, there are many enforcement tools such as compliance and informational questionnaires that create burden for businesses is for those selling to multiple states. Lastly, regarding the third caret root guarding the third category, still exposed to risks including liability. Todays remote sales talks laws have resulted in more revenue to local galleys to low cloud he dashed to localities at the expense of Small Businesses. This concludes my prepared statement and i look forward to answering any questions that the committee may have. Good evening. A second witness will be mr. Hennessey, excuse me. Ranking member crapo, and members of the committee, thank you for the opportunity to speak with you about this matter thats very important to Small Businesses. We bring the joy of coin collecting to his Many Americans as possible. We serve collectors in all 50 states by mail order directly to their homes from our single physical location in New Hampshire. Prior to the wayfarer ruling we had never been subject to the collecting of state and local sales taxes. It created a situation where we are Tax Collector to many jurisdictions with no way to calculate the tax rate, force is to be to become compliant ourselves. We hired outside tax experts. Paid thirdparty software developers. And rewrote our Computer Systems. We became compliant to the best of each of our interpretation in january 1 20 19. Even after getting up and running we spent 50,000 50,000 per year on legal advice, software, and our own Customer Service ip time to remain in compliance. Some taxes we pay out of our own pocket totaling 40,000 dollars per year in total we have paid half 1 million in Companies Funds since 2018 to comply with the wayfarer ruling. We regularly file k paxson opecs to while weve purchased and customized the commercial Software Package to assist us, the sheer complexity is a risk to our business. Just last month, routine Software Update caused an error caused causing a problem that we owed to states and could not collect from customers. Just last month, we experience what we believe is the tip of the iceberg of states reaching beyond sales taxes to an unlimited number of new taxes and fees. The state of california sent us notice to pay income tax for doing business in california despite having no cash we must now incur legal fees to defend ourselves. If we are forced to go to court, legal fees would exceed 100,000. There is now a retail sale fee to we must read write our rewrite our Computer Systems to comply. Regarding retroactive taxation, we have received notices for payments as far back as 2018. Because we are unable to collect taxes for that time, we are forced to pay the taxes ourselves. We have settled with three states, totaling 100 40,000. Regarding state and local audits, Going Forward we are subject to 45 state audits and countless local audits. Each will take time to support our compliance. If there is a question as to whether we have interpreted correctly, we may be half to 4 we may be forced to foot the bill ourselves. The landscaper remote sellers continues to be burdensome. The Supreme Court left the door open for congress to act, we need congress to level the Playing Field to help Small Businesses while continuing to operate and grow our businesses. We need to create a bipartisan solution to this as quickly as possible. Thank you for the opportunity to testify today, i look forward to responding any questions you may have. Thank you for the opportunity to share my experience in trying to meet sales Tax Compliance. I was determined to solve a problem and bring everyday wellness to more people. A few years after launching my company i quit my corporate job and what 100 into growing bigger. Any Business Owner can tell you that the journey to entrepreneurship is not linear. It is full of ups but more downs. With covid, supply chain and managing cash flow, over the past four years trying to understand and comply with salestax regulation area i became aware of the south dakota wayfarer case from my accountant. I immediately understood the impact it would have on my business and thousands of ecommerce sellers. Though i live in it state with no sales tax, most my revenue comes from montana. I needed to understand how to comply with these regulations. The more i learned, the less i knew and the more complicated it became. There are many challenges that make collecting and remitting salestax difficult. The criteria range from revenue, transaction volume, physical volume, how a product is used, what makes it even more complicated is that even all states have varying sales tax rates. And they have hundreds per jurisdiction. You can understand this became overwhelming. I didnt start my business to collect sales tax, but i wanted to be compliant. They determined i was at next is for 22 states, which was a surprise because most of my revenue came from wholesale and resellers. Ecommerce only countered ecommerce only accounted for 30 of my business. Administrative costs and time continued. I had to register with the department of revenue for each of those states. I had to collect sales tax from customers purchasing products in those estate. Purchasing products in those states. In total, i have spent close to 50,000 in outofpocket costs in order to comply with tax legislation. I know many ecommerce sellers, we want to be compliant and pay our taxes accordingly. The Current Conditions make it excessively complicated and add many costs and fears that we are doing something incorrectly. I have known businesses that closed because the complexities and costs were too much for many business odors Business Owners. This shift to online commerce does not work for existing regulations. There are a few things that could make it easier for ecommerce sellers. A uniformity around criteria, this would make things more transparent for businesses. The second is for states to provide one salestax for ecommerce sales area this would make calculating salestax amounts much easier and could help reduce reliance on expensive technology, one seller recently allowed sellers to calculate one salestax rate for the remit amount. You may hear people say that there are Technology Platforms that help with these with this, thats a costly bandaid for an issue that will continue to grow. They help but they cause they cost tens of thousands of dollars. Shopping behaviors have changed behavior Shopping Behaviors have changed forever. Here is a reality, ecommerce is a 1 trillion industry growing at around 16 annually. Complexities around salestax limit ecommerce owners. This is a time to simplify the sales tax process. This would help create dollars that could be reinvested in people and their businesses. If you would like more, please reach out. I am also available to collaborate in any way possible. Chair wyden thank you. Mr. Craig johnson. Thank you for