Why an Internet Sales Tax Could Crush Small Businesses

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The Senate passed a bill on Monday to bring the nation one step closer to having an internet sales tax.  Online retailers with more than $1 million in sales outside of their home state would be forced to start collecting and paying out sales tax to the 46 states that require it. Alaska, Delaware, New Hampshire, Oregon and Montana are the only five states that do not have sales taxes.

The new tax law could be a huge burden to small online businesses.  Not only will there be a huge administrative burden, but these small retailers would likely be forced to overhaul some of their current processes.  Necessary modifications, like that of updating accounting software or changing website shopping cart systems could cost small businesses well into the thousands – a large amount for any business, but especially those making under the $1 million mark.

Once the process updates are made, there will still be the yearly administrative costs and added manpower needed to tackle the ensuing nightmare of paperwork.  It’s likely that these additional expenses may be too much for many small retailers to bear and many may be forced to cut employee hours or cut some positions altogether.

Thankfully, there will not be any shortage of lenders, like Direct Capital, willing to lend to cash strapped small businesses.  A loan like a working capital loan* could be just the thing a small business owner needs to make up for some lacking cash flow or to help offset some of those big hits to their bottom line.

Will your small business be affected by the internet sales tax? How do you plan to deal?  Tell us about it!

Direct Capital is a leading nationwide provider of equipment leasing, business loans, and working capital.

*Working capital not available in the following states: AK, DE, ND, VT