The Marketplace Fairness Act – Fair To Whom?
When the long anticipated and highly controversial Marketplace Fairness Act of 2013 passed the U.S. Senate on Monday, cheers and jeers could be heard from online retailers, retail associations, and brick-and-mortar stores. Whether you love or hate this bill has everything to do with your business structure.
Who Loves it?
[list style=”check”]- Larger online retailers (multi-channel merchant) who also have a physical presence, such as a store or warehouse, in several states. They already collect taxes on many of their sales. Examples: Amazon with its multi-state distribution centers and warehouse, and Walmart with its 50-state store locations.
- Smaller Main Street brick and mortar stores that have paid local/state taxes on their products and competed with online stores that are not required to pay.
- Some national, state and local trade associations such as the National Retail Federation and the American Sustainable Business Council. (http://www.marketplacefairness.org/support/)
- President Barack Obama
- Many State Governors who could use some of the additional tax revenue (estimated to be more than $23 billion collectively across the states) to avoid increasing taxes or cutting services.
Who Hates it?
[list style=”cross”]- Most of the American public. According to a recent Quinnipiac University poll, 56% of voters are against levying state sales taxes on internet purchases
- Anti-tax groups such as Americans for Tax Reform.
- eBay which is mostly comprised of smaller online retailers. eBay states its sellers would be unfairly penalized attempting to implement the requirements of the bill.
- Smaller online retailers who also state the bill is too complex.
- Some trade associations such as American Catalog Retailers Association
How would it affect your Online store?
It wouldn’t affect you at all if you have less than $1,000,000 in sales outside the states where you have physical operations.
Put simply, if you have more than a million in online sales, you’ll have to start collecting the taxes for buyers from any state that collects sales tax. Only five states don’t: Alaska, Delaware, Montana, New Hampshire, and Oregon.
The Challenge of Collecting the Taxes
The Bill that passed the Senate has been criticized for not aptly addressing the complexity of collecting taxes for more than 9,600 jurisdictions, including state and local governments. The Bill says states must simplify their sales tax laws before they can require the taxes be collected. Each state must become a member state of The Streamline Sales and Use Tax Agreement (SSUTA) or must meet minimum simplification requirements which have been set forth in the Bill. You can read the bill here -> http://www.govtrack.us/congress/bills/113/s743/text.
What’s Next?
Though there is support for the bill in the US House, some House Representatives say it is a tax increase and would overburden small online retailers. Consequently, the Bill is expected to face stiff opposition, but it already has been referred to the House Judiciary Committee. Chairman Bob Goodlatte (R-Virginia) has pledged to give it a fair hearing but also said it is not yet “sufficiently simplified.”
