As seen in the Sacramento Business Journal

Several state leaders said Monday that the state’s Board of Equalization should revamp a program aimed at collecting out-of-state sales taxes from small businesses — and the legislature should consider killing the program outright — claiming it has failed to generate the money expected and has put an unfair burden on small business owners.

At issue is the state’s Qualified Purchaser Program, which was designed to generate extra revenue in the 2009 budget by requiring small businesses the generate more than $100,000 in gross revenue to pay use tax on items bought out of state going back to 2007.

But business owners say it requires them to spend hours combing through invoices only to determine that 95 percent of the businesses owe no additional tax. That has pushed the average tax owned down to about $47 per filer.

George Runner, a former state senator and current member of the Board of Equalization, said at a news conference that he will seek changes to the current regulations to ease that burden, while looking for a sponsor in the legislature for a bill that would end the program.

The program has collected an additional $56 million in taxes, but has cost $23 million in administrative costs and small business advocates say it has placed a huge burden on businesses that don’t have accounting departments. It was expected to generate four times as much revenue for the state as it has collected.

Businesses that generate $100,000 or more annually were automatically registered for the program. Many were confused, especially because the state’s tax forms already have a place to declare use tax. If the business revenue drops below that figure, the business is still required to file the forms, Runner said.

John Kabateck, executive director of the California Chapter of the National Federation of Independent Businesses, said the program is “just another classic but very dangerous” example of regulations driving business out of California.

They were joined by state Sen. Bob Dutton, himself a small business owner who has been required to submit forms even though his business has dropped below the initial requirements for the program. Dutton said he would consider carrying a bill to eliminate it.