Repeal the Three Percent Government Withholding Tax

  1. The electronics supply chain will be hard hit by the three percent government Withholding Tax
  2. Three percent withholding will be especially burdensome for small businesses
  3. IPC has been fighting to repeal the three percent Withholding Tax
  4. Take action – Contact congress urging their support to repeal the three percent government Withholding Tax

Summary

The three percent withholding tax will negatively impact U.S. electronics companies. The three percent Withholding Tax is a law that mandates federal, state, and local governments to withhold three percent from payments for goods and services. The withholding tax will result in lost revenue for companies that provide products or services to the government. The three percent withholding Tax is a far-reaching mandate inserted into the Tax Reconciliation Act of 2005 at the last minute and is slated to go into effect on January 1, 2013. The three percent burden will likely force companies to increase costs to offset the impact of delayed payments and disrupting businesses' cash flows. If the three percent withholding tax is not repealed the law will adversely affect electronics companies of all sizes during a time in which the industry is already dealing with a volatile economy. Repeal of the three percent withholding tax is supported by a broad and diverse coalition of more than 300 organizations representing American businesses, manufacturers and other groups.

The electronics supply chain will be hard hit by the Government Withholding Tax

Companies in the electronics supply chain will be negatively impacted by the withholding tax. For example, on an invoice for $20,000 the government would pay the business $19,400. Expand this example to the billions of dollars in government contracts and the electronics industry may lose millions of dollars. Businesses working with the government may be forced to pass the withholding amount down to their subcontractors who in turn will pass it onto their subcontractors.

According to the U.S. Chamber of Commerce the impact on businesses will be significant.

Hurt Cash Flow: The three percent withholding tax will significantly affect a company's cash flow. This onerous requirement is based on revenues from government payments with no relationship to a companies’ taxable income. Businesses will lose vital funds needed to operate day-to-day activities and finance new jobs.

More Paperwork: All those affected will have to institute new complex and costly accounting systems and reporting requirements that track every transaction covered by the mandate.

Back to top

Three percent withholding will be especially burdensome for small businesses

The three percent withholding tax will have a negative impact on small businesses because they will have to fewer resources needed for day-to-day operations, job creation and business expansion. In today’s economy, loss of revenue to a small business will be difficult to absorb.

Back to top

IPC has been fighting to repeal the three percent Withholding Tax

IPC, along with 150 industry groups and trade associations of the Government Withholding Relief Coalition, have been successful in delaying the implementation of the three percent Withholding Tax. However, circumstances have now changed. Unless repealed by Congress the three percent withholding tax will go into effect on January 1, 2013.

Back to top

What can you do?

Please visit our online Legislative Action Center here www.ipc.org/LAC-3-percent to send a letter to your elected officials urging them to repeal the three percent government withholding tax. IPC's Legislative Action Center is a website where you can easily send an e-mail to your legislators and/or government officials. A pre-drafted message is ready for you to personalize and send via e-mail.  All you have to do is input your information and the rest will be done for you.

Back to top