Just when you thought it was safe to dip your toes into the blue ocean waters of online retail, a menace from the deep is again lurking below the surface. It called the Marketplace Fairness Act (MFA) bill and it has been newly re-introduced for 2015.
Marketplace Fairness Act: What It Is and What It Does
This bill in various forms has been proposed in every Congressional session since the year 2000. It is essentially a bill to level the playing field between online retailers and brick-and-mortar retailers that are mandated to collect sales tax for the states in which they do business.
The problem is that online retailers are not just selling their wares to people in one state. If this mandate is passed, it places an onerous burden on these online merchants to learn and comply with the separate sales tax laws in each of the individual states. Many of these of these small independent online retailers either can’t comply with the myriad laws in each state, not to mention, separate tax rates for each of the counties and special districts within the state, or afford to pay a service to calculate these separate taxes for them.
New Provisions
The 2015 version of the bill includes a couple of provisions that may appease the lawmakers that have opposed earlier iterations. First, businesses that gross less than $1 million in sales are exempt. However, as Dr. Evil from Austin Powers learned, one million is not what it used to be. A business that grosses a cool million, may only be netting a hundred thousand, after expenses are calculated. They could even be losing money.
Second, states are banding together in a consortium and agreeing to simplify their tax laws to make them more palatable to online sellers across state lines. This pact is called the Streamlined Sales and Use Tax Agreement (SSUTA). Currently, 24 states have signed on to the SSUTA including such conservative bastions as Oklahoma and Georgia, as well as, the liberal strongholds of Vermont and Washington state.
Pros and Cons
Support for the bill has come from senators and representatives on both sides of the aisle that focus on the unfair advantages that online sellers have over local retailers. Several local merchants have complained that online retailers, who aren’t compelled to collect sales tax, have an unfair advantage over them because they can sell less expensively.
Opponents point out that Mom and Pop aren’t still trying to keep their corner grocery afloat. They are the very people that have moved into e-commerce to complete with Wal-Mart and Target and they are the ones that are selling on mega online giants such as, Amazon and eBay to compete with the corporations that have already driven them out of their brick-and-mortar stores. Taxing their online sales would just shift their advantage back to big box retailers. It should be noted that Amazon has agreed to voluntarily collect sales tax already for the states in which they sell.
The Bottom Line
If you are an online merchant, watch this bill closely. Its predecessor in 2013 already passed in the Senate by a large majority and it is probably only a matter of time before the House climbs on board with them. Consider how you will need to adjust your operations to comply with this latest effort by a government, the states this time, to get its hands on part of you profit.
