- 76% of tea merchants have received penalties or fines for non-compliance with sales tax obligations, with the average fine being $2,000, as they navigate more than 900 different tax rules on tea products across the country.
- 70% of US businesses report that sales tax complexity is one of the biggest burdens on their companies.
- 8,700 sales and use tax rate changes across the US have been reported thus far into 2023, that’s nearly 30 a day
- Food has the most tax rate changes this year with 4,967 changes, and the top 3 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
BOSTON, MA — DECEMBER 7, 2023 — Avalara, Inc., a leading provider of cloud-based tax compliance automation for businesses of all sizes, today released new survey* findings that show tea merchants and small to medium businesses in the United States continue to struggle to navigate with tax complexity and tax rate changes on the eve of the 250th anniversary of the Boston Tea Party. In fact, eight in 10 tea merchants (82%) feel anxiety related to staying on top of their tax obligations. In the US, 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, VP of US Tax Policy at Avalara. “Fast forward 250 years and US 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 US.”
The survey also found that three-quarters of modern tea merchants (76%) have faced penalties or fines for tax errors — costing an average of $2,000 annually — as nearly all sellers (94%) are unaware of the number of different tax rates on tea products.
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 expanding into new markets both domestically or internationally. For example, a US business selling tea products to customers in the European Union (EU) 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 across their obligations. In fact, 4 in 5 (83%) tea merchants in the United Kingdom (UK) have faced penalties or fines due to unintentional non-compliance with US sales tax obligations. While the majority, (53%) agree that it is more difficult to sell tea in the US given tax complexities when compared to selling elsewhere