Technical problems, such as incompatibilities with invoicing software, accounting software and shopping cart software, will be plentiful if the proposed MFA is passed. The founders of this coalition, who have been in the business of software engineering and web development for over a decade, are in a unique position to help us shed some light on this topic. Their intimate knowledge of the subject matter confirms implementation of the MFA would be wrought with problems. The solutions to these problems will come at a cost of hundreds of millions of dollars to businesses nationwide and therefore consumers in the form of higher prices.
Supporters of the MFA would like to have you believe that this problem is easily solved by providing businesses with “free” software that calculates the tax rate. It’s a complete fairy tale and here’s why:
Shopping Cart Software Incompatibilities
Much of the current shopping cart software used by online retailers will be almost entirely incompatible with the MFA. The software generally isn’t capable of keeping track of literally thousands of tax categories and jurisdictions. While the government’s “free” software may provide a list of tax rates and jurisdictions, this does nothing for existing software that isn’t compatible. Replacing or modifying the software would be prohibitively expensive for many businesses. Expensive technicians and programmers would need to be enlisted in some cases at a cost that the average business couldn’t shoulder.
Item Categorization Problems
The government’s “free” software does nothing to categorize your existing inventory. Items can be taxed at one rate in State A, another rate in State B and not at all in State C. Due to this, all businesses would have to categorize their entire inventory based on thousands of different tax codes in thousands of different jurisdictions. It could take an employee weeks to properly categorize just a few items. What about those who have hundreds of items? Thousands? It is our belief that properly categorizing inventory will be essentially impossible for most small businesses.
Invoicing Software Incapabilities
Most invoicing software for smaller businesses is simple and not capable of handling thousands of different sales tax jurisdictions. Only the most expensive and complex invoicing software meant for large enterprise is even remotely capable of handling all these tax rates. Even with software like that in hand, it’s still questionable. Even extremely large enterprises that use large ERP systems rarely have a presence in every state, therefore requiring collection of sales tax. Only the retail giants fit into this category. They have a sales presence in most every state and therefore use highly customized software to accomplish this at significant expense. At the very best, a small business shipping or delivering items to other states would be required to upgrade to an enterprise-style invoicing solution at a cost of many thousands of dollars.
Invoicing on Delivery
Many businesses that deliver items or services to other states using company delivery vehicles often use small, portable devices to invoice the customer on-the-spot. These simple devices most certainly aren’t capable of databasing thousands of tax rules and rates for every jurisdiction in the nation. Advancements in software most certainly and possibly hardware as well would be needed for these companies to simply stay in business.
Accounting Software Incapabilities
Most accounting software for small businesses has been designed around the compliance requirements of businesses during the last 20 years or so, which has not involved collecting sales tax from potentially every city, county and state in the country. These accounting programs will not generate taxable sales reports for thousands of jurisdictions. Again, only enterprise accounting software could come close to satisfying these requirements – at a cost of thousands to the businesses.
Accountant Interpretation Problems
Most small businesses don’t have a staff accountant. Financial data must then be delivered to a contracted accountant in digital or paper format. In the case that the MFA is passed, the paper option would be totally ineffective. Every jurisdiction the business sold a product or service to would have to be printed out and delivered – and in some cases would amount to hundreds and hundreds of pages of information. Even some universal digital formats would become potentially useless. Standard formats such as CSV and XLS require that table headers be matched up to fields readable by the accountant’s software. The many thousands of entries for individual jurisdictions would make this nearly impossible. In many cases, the only practical solution might be for the accountant to use the exact same financial program as the business in order that data would be directly readable. Hardly a realistic solution as an accountant is likely to have hundreds of clients, all using different software. In any case, the quantity of data, compatibility problems and the sheer number of tax jurisdictions to submit data for would undoubtedly increase service costs to the business many-fold.