For some small businesses, a tax refund isn’t worth the pain of tracking it down

By Nicholas P. Brown and Tom Hall

NEW YORK, March 4 (Reuters) – On the day the U.S. Supreme Court struck down tariffs that cost Ian Rosenberger’s backpack company D’Owl tens of thousands of dollars, friends started sending him congratulatory messages. He did not share their happiness.

“I don’t see any possible way to get that money back,” said Rosenberger, whose Pittsburgh-based company, with sales of only a few million dollars, is unlikely to afford the attorneys’ fees.

About 2,000 companies, including FedEx, Costco, and L’Oreal, have sued for refunds in the U.S. Court of International Trade, with likely more plaintiffs. The Supreme Court ruled on Feb. 20 that President Donald Trump’s use of emergency tariffs exceeded President Donald Trump’s authority, and many businesses are now facing a months-to-years-long battle to get their money back.

But many small business owners have concluded that while the decision is a win on paper, recovering the costs of the tariffs won’t be easy — if it ever happens.

Lawyers and business owners interviewed by Reuters say suing for refunds would cost them time, money or both to keep operations going. “The number of conversations and analysis we’ve done … time is critical for our team,” said Cassie Abel, CEO of Idaho-based outdoor apparel company Wild Rye.

Small businesses pay one-third of the tariffs

About 97% of US importers are small businesses, according to the US Chamber of Commerce, and the tariffs they pay could be a big headache in 2025. Of the $175 billion in tariffs owed to the U.S. government, small businesses paid about $55 billion, according to Penn Wharton Budget Model researchers at the University of Pennsylvania.

Oliver Dunford, an attorney at public interest law firm Pacific Legal Foundation (PLF), which represents children’s clothing maker Prince Osamu, said some cash-strapped small businesses “will just suffer.” Lead plaintiff in case against tariffs.

For small companies facing renewed global uncertainty, legal considerations represent an additional cost that larger companies don’t have to worry about.

Even small businesses that can afford to make judgments prefer a wait-and-see approach.

ECR4Kids, which makes kid-focused fixtures and educational products such as toy boxes and cribs, has annual revenue of nearly $70 million. Still, for now, founder and editor Lee Siegel points to a lack of clarity in the trial process, and no guarantees of results.

“I’d like to see the dust settle in a couple of weeks,” said Siegel, whose company paid about $2 million in deferred tariffs.

Siegel wants to use the returns to lower prices on ECR4Kids’ unsold US inventory, so a long, expensive court process could make them worth less. “Refunding is important, but it’s more important if it’s done quickly, because it allows us to stabilize prices,” he said.

‘Not novel or difficult’

Small business advocates say the government has the infrastructure to easily roll back tariffs, and has already done so. “It’s not new or difficult,” said Don Anthony, executive director of We Pay, a small business coalition formed to advocate for refunds.

However, at a press conference after the ruling, Trump predicted that “we’re going to be in court for the next five years” over the refund. George Tuttle, a lawyer and international trade expert, said the government could keep some of the disputed money if claimants don’t fight for it.

Eva St. Clair, co-founder of Princess Awesome, says she “hopes (the government) will simply refund us” without further judgment – but has not ruled out going to court to recover about $30,000 in tariff payments.

Cost, however, is an obstacle. Her company — which survived the tariffs by collecting $8,000 from customers through a virtual tip jar — was represented pro bono by PLF Dunford in the case that reached the Supreme Court. “I can’t imagine how long it would take to pay a lawyer,” St. Clair said.

Banks and hedge funds buy refund claims at roughly 40 cents on the dollar, enabling some businesses to recoup a portion of their claims while avoiding legal headaches. Some, however, refuse to sell out of principle.

“I’m not the type to trade two dollars for one,” said Michael O’Shaughnessy, president of TV supplier Element Electronics. His company sued for a refund, but he didn’t get his wish. “Once the government takes your money, you never get it back.”

Rosenberger reduced D’Oval’s territory and cut off a profitable sales channel after the tariffs were implemented. He said sacrificing the refund meant saving his business.

“If I spend all my time with lawyers, it’s time I’m not spending selling bags.”

(Reporting by Nicholas P. Brown in New York and Tom Halls in Delaware; Additional reporting by Helen Reed in London and Timothy Apple in New York; Editing by Peter Henderson, Lisa Joka and David Geffin)