They must file tax forms for every vendor that sells them more than $600 in goods.
The goal is to prevent vendors from underreporting their income to the Internal Revenue Service. The government must think vendors are omitting a lot because the filing requirement is estimated to bring in $19 billion over the next decade.
Business groups say it will swamp their members in paperwork, and Congress is listening. Democrats and Republicans want to repeal it, but getting them to work together on the issue is proving difficult in an election year.
The House rejected a bill Friday that would have repealed the provision. The two parties disagreed on how to make up the lost revenue.
"This foolish policy hammers our business community when we should be supporting their job growth," Sen. Mike Johanns of Nebraska said in the Republicans' weekly radio and Internet address Saturday. "It's only one example of how the administration's promise to support small businesses really rings hollow."
Democrats blamed Republicans for Friday's failure.
"Despite all of their rhetoric about the need to eliminate this reporting requirement, Republicans walked away from small businesses when it mattered most," said Rep. Sander Levin, D-Mich., chairman of the tax-writing House Ways and Means Committee.
Businesses already must file Form 1099s with the IRS when they purchase more than $600 in services from a vendor in a year. The new provision would extend the requirement to the purchase of goods, starting in 2012.Goods included
The requirement would hit about 38 million businesses, charities and tax-exempt organizations, many of them small businesses already swamped by government paperwork, ac-cording to a recent report by the National Taxpayer Advocate. It would also create an avalanche of paperwork that could strain the IRS itself, wrote the advocate, an independent watchdog within the IRS.(2 of 2)
Small businesses struggle despite federal money for lendingEstablishing a Lead Triad