Bill Overview
Title: Cut Red Tape for Online Sales Act
Description: This bill modifies requirements for third party settlement organizations to eliminate their reporting requirement with respect to the transactions of their participating payees unless they have earned $5,000 or more. A third party settlement organization is the central organization that has the contractual obligation to make payments to participating payees (generally, a merchant or business) in a third party payment network. The bill also requires entities that report income to to issue a plain-language description of the taxability of income reported on Form 1099-K.
Sponsors: Sen. Hassan, Margaret Wood [D-NH]
Target Audience
Population: Online consumers and businesses using third party payment networks
Estimated Size: 258000000
- The bill modifies reporting requirements for third party settlement organizations, impacting their operations and potentially their cost structures.
- These organizations typically deal with businesses and merchants who use their payment networks, affecting their compliance procedures.
- Approximately 2.14 billion people made online purchases globally in 2021, suggesting a large user base for third party payment networks.
- Millions of small businesses globally rely on third party payment networks for transactions, and changes in regulations directly affect how they operate.
- The plain-language requirement for reporting income could impact all businesses by improving their understanding and compliance with tax regulations.
Reasoning
- The policy modifies reporting requirements for third-party settlement organizations focusing on US small and medium businesses using online sales platforms.
- Industries heavily dependent on online sales such as retail and digital services may be most affected due to changes in cost and compliance.
- Businesses with incomes exceeding $5,000 via third-party networks might be impacted differently than those below due to the variance in requirements.
- The long-term impact may result in increased clarity in tax reporting, potentially boosting compliance rates and operational efficiency for businesses.
- The investment for creating plain-language tax reports aligns with public interest, potentially increasing overall transparency.
- Not all citizens will be impacted directly; a focus on business owners, especially smaller ones who rely on these networks for substantial incomes will be crucial.
- A range of effects is expected -- from negligible for individuals not using these networks, to significant for small business adapting to the compliance changes.
Simulated Interviews
Freelance Graphic Designer (San Francisco, CA)
Age: 34 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- The policy seems aimed at reducing bureaucracy; as someone who relies on these platforms for income, less paperwork is always good.
- I'm interested in how this affects smaller earners like me under the $5,000 threshold.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Owner of a small online retail shop (Austin, TX)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- I support anything that reduces the complexity of the paperwork I have to handle.
- Interestingly, clearer tax language is something I've needed as I had to invest in an accountant.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 5 |
Digital Marketing Consultant (New York, NY)
Age: 29 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 6/20
Statement of Opinion:
- The changes might mean my clients, who are small business owners, will have less worry about tax compliance.
- I'm curious to see how reporting requirements actually change on the ground.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 6 |
Retired business owner (Cleveland, OH)
Age: 62 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 10/20
Statement of Opinion:
- I always prefer less red tape in any aspect of life.
- As a retiree making occasional sales, the threshold change won’t significantly affect me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 6 |
Tech Entrepreneur (Seattle, WA)
Age: 39 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- Efforts to simplify tax compliance are necessary, but I worry about hidden costs or shifts in processing fees.
- The plain-language descriptions might finally make sense of my tax situation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 4 |
Social Media Influencer (Los Angeles, CA)
Age: 25 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- While it’s unclear how this will affect the influencer industry, less reporting is probably a good thing.
- Not sure if I fall under this bill's target, but hope it simplifies taxes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 5 |
Accountant (Chicago, IL)
Age: 47 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 7/20
Statement of Opinion:
- As an accountant, simplifying tax laws is always beneficial, reducing client concerns.
- Clear communication affects not just the clients but our tax preparation process positively.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Owner of a Local Bakery (Miami, FL)
Age: 53 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- Reducing bureaucratic steps is always welcome when operating a business.
- I hope this means fewer errors in tax filings, which can be costly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 5 |
| Year 5 | 8 | 5 |
| Year 10 | 7 | 4 |
| Year 20 | 6 | 4 |
Manager at a Mid-sized Logistic Company (Phoenix, AZ)
Age: 31 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- Cutting red tape fosters a better business environment.
- Simplified reporting might reduce compliance costs over time.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Online Craft Supplies Seller (Rural Vermont)
Age: 37 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- My sales fluctuate, having a fixed threshold simplifies planning.
- Every little reduction in paperwork helps small sellers like me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 4 |
Cost Estimates
Year 1: $5000000 (Low: $3000000, High: $7000000)
Year 2: $5200000 (Low: $3200000, High: $7200000)
Year 3: $5350000 (Low: $3400000, High: $7350000)
Year 5: $5550000 (Low: $3500000, High: $7550000)
Year 10: $6000000 (Low: $3800000, High: $8000000)
Year 100: $7500000 (Low: $5000000, High: $9500000)
Key Considerations
- Impact on tax compliance and enforcement efficiency.
- Potential reduction in administrative burden for businesses.
- Possible improvements in taxpayer understanding and compliance.