How is this different from sales tax? 45 of 50 US states have a sales tax, and I don't think retail shops are dying off in those states.
Actually, sales tax is a huge problem for small business in the USA. I've been interacting with small business owners most of my life because of my family, and it's incredibly common for them to thoroughly detest sales taxes.
In general, the rules for sales taxes very enormously from place to place and year to year. They are usually written in language that is very hard to understand, often ambiguous and even contradictory.
As a kid I remember reading cases in the paper where newspaper reporters asked three different government officials a sales tax question and got three different answers. As an adult, I haven't seen any indication that things have changed.
Further, small businesses today are not just local: they are very much dependent on the Internet and have a national and even global customer base. But there are over 82-thousand taxing jurisdictions just in the USA - which means these don't necessarily align on zip code boundaries. To make matters worse, sales tax systems are every bit as subject to corruption as any other aspect of US government, and there are all sorts of special provisions and special cases in these systems that have been purchased by various special interests through mechanisms such as 'campaign contributions' (the politically correct word for 'bribery' - "invest in America, buy a politician!").
Unfortunately, you can't rely on software to tell you whether or not a tax is owed and on what products and how much is owed and who owes it, because software doesn't deal well with natural language ambiguities. Human judgement has to be used - and hence small businesses are far more affected than large businesses because small businesses can't afford a permanent staff of lawyers and accountants to deal with these issues.
To make matters even worse, small businesses generally can't just pass on the costs of dealing with the tax system to their customers the way the big companies do (think about why that is...).
So basically, sales tax systems are a problem for small business owners: they take lots of time, they require extra record keeping, and it's just a huge pain even if you are lucky enough to never get randomly selected for an audit.
Small business owners often spend huge amounts of time on their business - far more so than the average corporate employee spends on their job. This isn't even counting the time they spend on the tax issue - it's just the nature of running a small business. People who haven't done it and don't have family doing it don't realize how much it consumes your life. The additional burden of overhead caused by sales tax systems and just the general hassle of dealing with it is one the factors that causes people to just quit and find something else to do. Otherwise viable small businesses are killed because of sales tax policy.
From a Bill of Rights perspective, sales taxes as they are currently implemented in most states can be viewed as being in violation of a number of fundamental rights that the 9th Amendment protects, such as the right to ethical government (think about it!) and the right to ethical practice of law (think about it!).
But the corruption in US government and the ethics problems in US law (federal, state, and often local) are very deeply entrenched, so nothing gets done to correct the Bill of Rights violations - and basically small business gets screwed. Court decisions such as the one in South Dakota vs Wayfair (2018) have clearly demonstrated that the US legal profession has no real interest in fixing the problems and in fact are actively making things worse. This fits with the long term trend of legal ethics problems getting worse in the USA, as a fraction of GDP, considering the years from 1950 to the present day.
You can find references on this topic in business school textbooks on "Risk Management and Insurance". It's not a new problem. This is how things work in the USA, small business issues with sales taxes are just another symptom of a corruption and legal ethics cancer in government and in the various legal systems (federal, state, local). If you want more information on this topic you can look at "The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality" - by Brink Lindsey and Steven M. Teles [2019]. It has all kinds of references to studies that have appeared in peer reviewed journals on a variety of topics that basically come down to issues with legal ethics and deeply entrenched corruption.
It should come as no surprise to find that the US looks poor in comparison to other developed nations in terms of small business metrics such as employment. For example: "An International Comparison of Small Business Employment - John Schmitt and Nathan Lane". There is a huge negative impact from sales taxes and other problematic government policies on small business in the USA: other developed nations have their own problems (for an interesting perspective on some of those problems see The Almost Nearly Perfect People: Behind the Myth of the Scandinavian Utopia by Michael Booth [2016], but on the whole most other developed nations do a lot of things better than the USA does.
Small businesses are not the only ones harmed by sales taxes.
From a general social perspective - thinking in terms of the long term good of society and how government can either contribute to that or do harm - sales taxes are highly regressive. This means most of the burden is paid by the poor and the middle class. Most of the rich are incredibly stingy and pay very little in sales or property taxes. A sales tax that affects even a relatively small portion of consumer spending can have an enormous impact on the people who have the least money.
To make matters worse, even if some things like food are not taxed directly, the business overhead associated with the sales tax problem tends to be reflected in higher costs for the non-taxed goods, so people are in fact paying more for those things, they just don't know it. After all, the bottom line for a business requires setting all costs against all expenses. Also, even if US-style sales taxes aren't applied in each transaction the way a VAT is, the overhead does affect each transaction, which means it's subject to the normal compounding and feedback processes that happen in all real economic systems. So you aren't just paying once, you are paying multiple times. Since it's all hidden, people don't realize this and often have completely delusional ideas about the real consequences of sales tax policy.
Finally, UN studies show that corruption in government is the single biggest contributing factor in violence. Having a legal system riddled with massive legal ethics problems is certainly a form of corruption, and it leads to a loss of perceived government legitimacy and to dysfunctional government. A dysfunctional government drives people to crime and creates mental illness in much the same way as a dysfunctional family does. So the violence problem in the USA (relative to other developed nations) is mostly a reflection of fundamental problems. Many people are seeing this more clearly now with the increased crime rate resulting from poor government handling of CoVid.
The USA badly needs to fix the corruption and the legal ethics problems, and as part of that, the USA would be much better off replacing all sales taxes with taxes based on income and wealth and tariffs ( in that context, it's worth nothing that EU VAT taxes are automatically added to the base tariff rate, so the EU actually has a much higher tariff than people think ... ).