Merkley, Wyden, Colleagues Call for Answers on Wayfair Sales Tax Compliance Software, Impact on Small Businesses

WASHINGTON, D.C. – Oregon’s U.S. Senators Jeff Merkley and Ron Wyden, along with U.S. Senators Maggie Hassan (D-NH) and Jeanne Shaheen (D-NH), have written to seven tax compliance software companies about the affordability and accuracy of their products, which many small businesses use to comply with the Supreme Court’s Wayfair decision requiring businesses making online sales to submit sales taxes to every state in which they have customers. The letters are the senators’ latest effort to fight for small businesses in states that do not have sales tax. 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 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. Small businesses also 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. 

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,” the senators wrote.

“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,” the senators continued.

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.

Previously, Senators Merkley and Wyden have teamed up with their colleagues to introduce 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, and have introduced the Stop Taxing Our Potential (STOP) Act to overturn the Wayfair decision.

The senators’ letters are available here.