To commemorate the 250th anniversary of America's most famous tax protest, the tax compliance technology provider Avalara surveyed tea merchants and other taxpayers about the tax problems they continue to face, while stopping short of dumping their tea into Boston Harbor as the American colonists did on the historic night of Dec. 16, 1773.
Avalara commissioned the London-based research firm Censuswide to
"One cold December night in 1773, a small group of North American colonists dumped 342 crates of British tea into the Boston Harbor to protest tax policies related to tea," said Avalara senior writer Gail Cole in a
The majority of tea merchants (83%) believe that tax complexity is now out of control and eight in 10 (80%) say it is one of the biggest burdens on their companies. The average tea seller spends more than nine hours a month on tax compliance and 71% of merchants say tax complexity has prevented them from expanding into new markets both domestically or internationally. A U.S. business selling tea products to customers in the European Union will need to comply with different rates of tax for green and herbal tea (3.2% and 9%, respectively).
As a result, 76% of tea merchants would urge the government to consider ways to reduce sales tax complexity with 42% considering lobbying decision makers and half (50%) even contemplating a legal challenge. As an alternative, 90% would look to reduce the burden of complexity with automation or AI.
American tea merchants are not the only ones struggling to keep up with their obligations. Over four in five (83%) tea merchants in the U.K. have faced penalties or fines due to unintentional non-compliance with U.S. sales tax obligations. While the majority (53%) agree that it is more difficult to sell tea in the U.S. given tax complexities when compared to selling elsewhere.
Tax compliance complexity of course goes well beyond the tea industry. The wider survey found that 70% of U.S. businesses report that sales tax complexity is one of the biggest burdens on their companies. Among small to midsized businesses, 40% have faced penalties or fines for noncompliance in the past, with the average fine costing $1,600.
Avalara's own research found 8,700 sales and use tax rate changes across the U.S. have been reported so far into 2023, or nearly 30 per day. The food industry has experienced the most tax rate changes this year with 4,967 changes, and the top three states for sales and use tax complexity are: 1) Alabama with 3,734 changes; 2) Kansas with 2,292 changes; and 3) Virginia with 743 changes.
Eight in 10 tea merchants (82%) feel anxiety related to staying on top of their tax obligations. In the U.S., there are more than 900 sales tax rules on tea products.
"The Boston Tea Party was our nation's first public disagreement over tax complexity — which is far from over," said Scott Peterson, vice president of U.S. tax policy at Avalara. "Fast forward 250 years and U.S. businesses that are selling goods across states today must comply with tax laws set by legislators they cannot elect — which presents an ongoing challenge as these businesses struggle to comply with constantly changing tax rules across the U.S."
The average business spends 10 hours a month on compliance, according to the survey, and 62% of businesses say tax complexity has prevented them from expanding into new markets, 80% of businesses would urge the government to consider ways to reduce sales tax complexity, and 88% of businesses would use automation or artificial intelligence to reduce the burden of complexity.
