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Small-Business Owner Says Streamlining Project Is 'Filled With Risk'

FEB. 8, 2006

Small-Business Owner Says Streamlining Project Is 'Filled With Risk'

DATED FEB. 8, 2006
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Prepared Remarks of Mr. Ernest Perry Owner Perry's at Southpark

 

Witness Testimony

 

 

Hearing Name

 

The Internet Sales Tax: Headaches Ahead for Small Business?

 

 

Committee

 

Subcommittee on Regulatory Reform and Oversight

 

 

Date

 

Wednesday, February 08, 2006

 

 

Mr. Chairman and members of the Subcommittee,

My name is Ernest Perry and I have been a small business owner in North Carolina for more than 25 years. I started in the jewelry business in 1978, managing a store for the retail chain Jewel Box Stores Corporation in Greensboro and learned as much as possible about running a business and the jewelry industry. Always wanting to go into business for myself, I had also become a licensed auctioneer and began offering my services to non-profits where I helped sell donated estate and antique jewelry to raise funds for their organizations. I later opened my own store called Perry's Jewelry Emporium, specializing in antique and estate jewelry in 1980.

As the price of gold and silver went up, so did our business sales. We were so successful that we opened multiple "Perry's" stores throughout North Carolina. Also at that time, I had a partnership with Sears Department Stores. I was the franchisee for over 45 Sears stores and essentially operated the jewelry departments for each of them.

However, I was growing weary of the travel and by 1995, I wanted to consolidate my stores and simplify my business operations. I chose the South Park location, which is the current site for the one "Perry" store today.

As I was undergoing a remodeling project for the store, a woman who was helping me with the remodeling, introduced me to eBay. She talked about the ease of conducting business on eBay and of the many success stories -- and I was immediately interested. While my storefront was continuing to do well, I was intrigued about having an online presence for my jewelry collection and being able to reach a much broader customer base without the earlier stress of travel. It was then that I recognized eBay's marketing potential and I developed the concept for Treasures Recycled.

I started Treasures Recycled in 2002 as a "drop off" location to accommodate the growing number of people turning to me to handle the resale of their personal jewelry as well as overstocked items from my storefront, Perry's. People bring me the items they would like me to sell for them and I turn to eBay to get the job done. This approach has allowed me to sell items to people in every state and other countries.

My sales from my eBay business continue to increase each year, approximately generating $1 million in annual sales. With just the online store, I have five employees and offer full benefits.

Implications of Changing Sales Tax Laws

Much of the appeal of eBay is that it allows an entrepreneur to develop his or her own Internet-based business, giving someone the ability to reach more potential customers than they ever could on their own. And it is easy enough for a busy small business person to use.

Through my experiences with eBay, I have met many people who have started their own business. I believe that the Internet attracts many people who otherwise may not be inclined to be a small business owner. In my personal case, I've been fortunate enough to have both a brick and mortar store and an online store. Because of this, I can speak as both an on-line and store-front small business owner.

I understand the sales tax issue and the "fairness" question it raises for online businesses that do not collect and remit sales taxes for sales to out-of-state customers. Be assured, I do collect and remit taxes for Perry's according to the tax code in North Carolina. There is single sales tax rate, and a single tax authority to remit the taxes to.

Legally, I am not required to collect and remit sales taxes for all the customers outside of North Carolina who visit Treasures Recycled, my on line presence. There is really no doubt in my mind regarding the complexity of what would be required to collect and remit taxes on the thousands of different tax jurisdictions around the country. My understanding is that there are more than 7,600 jurisdictions nationwide. There would undoubtedly be new costs imposed on my online business that would be very hard, if not impossible, to deal with as a small business owner.

While some people claim that there are big technology companies that would be happy to step in and take care of the tax collection and remittance job, I think that the SSTP process is filled with risk for small business owners. There are significant potential costs that I can see for any complicated sales tax plan, especially when a small business is forced to contract the job out to one of a handful of technology companies. Computer system upgrades or changes, training employees on new systems, and the possibility that the off-the-shelf solution doesn't work right, are all expensive risks. And finally, what if a couple of years down the road the fees go up? There is no going back and small businesses will be the losers.

There is no question that it has not been easy to be a small business retailer over the last few decades. The world has changed so much. The Internet is obviously one big change, and it's been both a challenge and an opportunity in the retail business.

But small retailers have also had to adapt and adjust to mega retailers like WalMart and the Big Box Stores who have used all kinds of technologies to revolutionize their global retail businesses. And in my experience, the Internet has actually empowered small business people to deal with those dramatic changes. I believe there is no question that the Internet offers a small business more opportunity than risk. And I believe that Congress changing the status quo on state sales tax laws would make it harder in the long-term for small businesses and entrepreneurs to succeed in the face of those challenges.

Again, thank you for inviting me to speak to this committee today.

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