Standard assessment of business taxation is one of the areas in tax law where one can find the substantial departure from tax accounting rules and principles. Due to the unique features of the small businesses, it has been found necessary to levy business income tax in accordance with the proxies and indicators, other than books of account and record keeping system, especially by developing countries, including Ethiopia. The difficulty to comply with the strict record keeping requirement under the standard assessment tax system is the main reason for having presumptive taxation. In Ethiopia, before the introduction of standard assessment in the tax system in 2001, small businesses were taxed on the basis of estimated assessment. This type of presumptive taxation totally relied on estimation of daily sale of the business by the tax officers. Even if a number of procedures were used to reach the final tax liability of the taxpayers, estimation of daily sale was the main cause of disagreement between the tax authority and small business taxpayers due to the subjectivity of the tax assessors and under-reporting of the taxpayers. In addition, administrative resources were not sufficient to deal with estimated assessment. The ANRS Tax Authority in general and BDCA Revenue Office in particular have begun to enforce standard assessment on small business taxation. Standard assessment has been introduced by the ANRS Income Tax Regulation No. 4/2003. Then, this method was continued and assessed in 2008 and 2012. However, due to absence of indicators for most of the businesses, the ANRS Tax Authority has relied on estimation of daily sale to apply standard assessment. In such a case, it is admitted that there are problems of legal and practical application of standard assessment of small business taxation in BDCA. This research particularly found that there is a contradiction between the rules of standard assessment and their practical application, since the actual tax liability of small businesses is being assessed according to estimated taxation. This practice has cause controversy between small businesses and the tax authority/revenue office. In addition to this, because of the subjective nature of estimations and under-reporting of daily sale, small businesses have been exposed to the problems of inequity and uncertainty of tax liability. The study was conducted based on a qualitative research approach by analyzing relevant laws, documents and data collected through interviews. Accordingly, the research discloses that there is no effective implementation of standard tax assessment for the actual collection of tax revenues from small businesses in BDCA. The problems affect both the revenue of the government and small business taxpayers. Essentially, they arise from the usual usage of estimation of daily sale to collect taxes and lack of awareness about the application of standard assessment method by the revenue office. Based on these findings, the research recommends that estimated assessment method shall not be used in order to bring stability and predictability of small businesses taxation. It also recommends that standard assessment needs to be more consistent and can also be adjusted so as to provide an incentive to small businesses to develop the habit of record keeping. In addition, it recommends that income tax laws should incorporate mechanisms to identify the annual turnover of most of the businesses. Last but not least, awareness creation activities to the tax authority/revenue office and business taxpayers on how standard assessment method should operate are recommended.