The San Antonio Express-News reports that many small business owners around the state are facing huge bills due under the new state gross receipts tax which starts in 2007, with the first payment to the state due by May 2008. The article notes that many firms are seeing a tenfold increase in tax due as compared with the franchise tax, which it replaces.
For example, San Antonio engineering firm of Goetting & Associates projects its 2007 state business tax will be 20 times higher than the franchise tax it paid in previous years. Business owners said in the article that the result of this tax will mean fewer jobs, lower wages, and less business expansion.
One of the most pernicious aspects of the new gross receipts tax is that even business which are not profitable must pay, because it is a tax on gross receipts or revenues rather than profits. Consequently, startups and fledgling businesses may never make it to being mature, profitable businesses because they cannot bear the tax burden in the formative years. Legislation considered, but not passed, this session would have exempted businesses with no reportable profits for federal income tax purposes.