Tax Code Burden on
Small Business
David L. Hurley, President
President’s Advisory Panel on Federal Tax Reform
March 8, 2005
Tampa, Florida
1
Introduction
Landmark started business in 1984
 80 employees
 Approximately $5 million in revenue
 Civil Engineering and Land Surveying
Services
 Labor costs represent 60% of total
revenue

2
Survey of Small Business
Paperwork Burdens
NFIB Study - Coping with Regulations
(2001)
 Survey of small business members about
greatest compliance difficulty
 Survey results show that tax rules create
the greatest difficulty for responding small
businesses

3
What types of regulations, federal, state or
local create the greatest difficulty for you?
6%
21%
17%
11%
9%
36%
Health/safety
Employment
Tax
Environmental
Occupational
Other/NA
4
Most Problematic Tax Regulations
NFIB Study - Coping with Regulations
(2001)
 Survey of small business members about
greatest compliance difficulty
 First five categories were supplied, next
six categories were volunteered responses
 Survey shows that income tax withholding
represents a significant burden

5
What type of tax-related regulations?
Deprec.
Cap. Gains
Sales/use
Inventory
Indep. Con.
(Withholding)
(Reporting)
(Income Tax)
(All)
(Other)
(DK)
0
5
10
15
20
25
Percent
6
Paperwork and Recordkeeping
Burden
NFIB Study - Paperwork and Recordkeeping
Burden (2003)
 Survey of small business members about
recordkeeping burden and who prepares tax
records for small businesses
 First Slide - Survey shows significant number of
small businesses used an outside person to
compile records
 Second Slide – Survey Shows that per-hour
recordkeeping costs were highest for tax-related
records

7
Who does your business's tax records?
You
Unpaid family
Employee
Outside person
Combination
8
The Per-Hour Cost of Small Business
Record-Keeping by Record Type
80
Dollars Per Hour
70
60
50
40
30
20
10
0
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9
Tax-Driven Business Decisions

Capital Acquisitions and Expenditures
– Buy vs. Lease

Section 179 Expensing
– Expiration in 2008 creates unintended consequences
for equipment vendors
– Volatility of ever changing rules creates uncertainty
for buyers and sellers
 Makes planning difficult

Vehicle Example
– 6,000 lb. SUV vs. smaller vehicle for small business
needs?
10
Small Business Compliance Costs

Compliance Costs Related to Taxes for Small
Business are Significantly Higher as a
Percentage of Revenue
– Costs for larger businesses are a smaller proportion of
their revenues.
Federal Tax Compliance is Only One Layer of
Burden for Small Businesses
 S Corporation Example

– $630 of compliance costs for other line of business
with approx. $20,000 of revenue (3% of total)
11
Conclusion
Important Role of Small Business in the
Economy
 High Compliance Costs to these Small
Businesses
 Don’t Forget the Important Role of Small
of Business in Providing Information and
Withholding to Taxing Authorities

– Tax Collector for Federal, State and Local
Governments
12