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Internet tax and Coast Guard fees on the horizon

The playing field might finally be leveling when it comes to taxes on Internet sales, while a renewal fee for documented boats is being sought by the Coast Guard for the first time.

The U.S. Senate voted 74-20 on Monday to close debate (called cloture) on the Marketplace Fairness Act. The bill now moves to the floor for debate and a vote that could take place as early as today.

The Marketplace Fairness Act is legislation that has been sought by a broad base of the nation’s brick-and-mortar retailers and is a high priority of the Marine Retailers Association of the Americas, according to MRAA Washington lobbyist Larry Innis.

The bill (S. 743) is sponsored by Sen. Mike Enzi, R-Wyo. It would hand state governments upwards of $11 billion annually as it grants all states the power to collect taxes from out-of-state vendors selling goods to their residents via the Internet. Cash-strapped states are eager to get the revenue, so they’re lovin’ it. So are retailers.

The idea has been proposed for years. Congress hasn’t moved. But it’s never been closer to reality than it is now with a filibuster-proof Senate majority apparently locked in. Those that are opposed claim it’s a new tax, but technically it’s not. Current law calls for shoppers to keep track of their online purchases and pay the applicable taxes in their annual tax filings. But few people do it. It’s also notable that the bill does not require states to collect the money, but gives them authority to do it.

Online retailers have been able to undercut the prices of their non-Internet competitors since online shopping became popular. Shoppers aren’t dumb. They’ve learned they can browse products in, say, the accessory section of a dealership, then with a click on their smartphones, make the purchase from an Internet retailer and save an average of 5 to 7 percent in sales tax.

The Marketplace Fairness Act won’t apply to businesses generating less than $1 million in out-of-state revenue. Still, it is common-sense legislation that is overdue in recognizing the real-world marketplace of today. A similar bill by Rep. Steve Womack, R-Ark., is in the House. If you want to see this become law, email your two Senators and your Congressman now.

Remember the 1990 Coast Guard User Fee? No, it’s not back, but there is a current proposal by the Coast Guard to institute a new annual fee of $26 for the renewal of documentation certificates on recreational boats. While there is an extensive list of applicable charges pertaining to issuing new certificates of documentation, heretofore there has been no charge for the required annual renewal. The proposed fee will, of course, only apply to boats that are federally documented and would be in addition to any state registration fees.

Boats must be at least five net tons to be eligible and documentation is often required by lenders financing a boat purchase. That’s because documentation provides a first preferred ships mortgage that has superior advantages for lenders in the event of a default situation.

Whether there should suddenly be any charge for renewal notwithstanding, this proposal brings up an interesting question: Why does a documentation have to be renewed every year if nothing material has changed?

If the proposed fee is to cover labor costs involved in mailing notices and processing renewals, why not just reduce those costs through operating efficiencies and by making renewals every three or five years? The documentation process is already loaded with a substantial schedule of fees depending on the specific service requested. But this proposed renewal fee appears to be simply a general revenue raiser and needs either genuine justification or immediate reconsideration.

Click here before May 3 if you want to share your thoughts with the Coast Guard on this proposal.

Comments

6 comments on “Internet tax and Coast Guard fees on the horizon

  1. Jon

    The internet fee is indeed long overdue! As a small mom & pop shop trying to sell ships store items against the big on line retailer who collects no tax has been unfair and should be corrected. It does not surprise me that the CG Documentation office is asking for more money as they can’t perform their duties in a timely manner right now. We submitted to have a first preferred ships mortgage released on a boat that was paid off in September of 2012 and to date they have not processed it only to find via a phone call to their office a couple weeks ago they are still working on submittals from March of 2012. They said if we want it released to apply for an abstract of title for $25 and they will be required to process it immediately. This is either poor efficiency or lack of manpower, will a $26 documentation renewal fee solve anything?

  2. Brian Leiva

    The Brick and mortar businesses are fooling themselves it they think more revenue will be generated in their locations. Online retailers don’t have the overhead and other tangible costs associated with running a store front so their pricing will always be cheaper (with or without) the sales tax.

    Those B and M locations that also sell on a website will just see their costs increase even further now.

  3. Timm Smith

    You obviously don’t think it will cause any problem for online retailers to keep track of the taxes due to 9600 different taxing authorities in the US. Then add in the costs of filing all that paperwork and putting up with audits from authorities in states a couple thousand miles away. All while having no footprint at all in these jurisdictions or receiving any benefit whatsoever for the taxes you remit. Maybe these retailers should be able to charge these jurisdictions for their tax collecting services.

    Personally, I don’t shop online to save a couple bucks in taxes. I usually end up paying that and more out in shipping costs, something b&m retailers don’t have to charge. I shop online for the greater selection, especially since I live in a relatively rural area with very few choices for shopping.

    This bill is being pushed by the really large online retailers like Amazon and Walmart in order to make it harder for the smaller online retailers to compete. Anyone who thinks this will help the b&m shops is naive. Local retailers have been alienating their customers for years with poor service, lousy selection and bankers hours that only allow those who are unemployed to shop. This is nothing more than another impediment to starting and running a business in this country. Just what we need during a recession!

  4. zyxw

    The big marine retailer is licking its chops because they already have to comply with all these different taxing jurisdictions and they know this will kick all their competitors in the teeth with tons of new paperwork, software, and costs they don’t have now.

  5. RedBW

    Documentation;
    Doing that renewal thing every year is a hassle. An unnecessary hassle. Something else you have to remember to do or there is a big fine. For what? It is a waste of man power, paper, postage, paper, etc. Government waste.

    When you move to a different address, the notice to renew is not forwarded, even if you have a forwarding order with the post office. So if you move, it’s real easy to forget and end up getting a fine for being late with your renewal. Not forwarding that notice ensures that most people will be late by the time they think of it and that is extra money for the Coast Guard. So now, it will be $26 on top of the fine when you ‘renew’ late.

    When I bought the boat and documented it, I paid something like $350. Unless the boat is sold, what do we have to keep renewing it for?

    When my spouse died and I had to have their name taken off, they charged me $85 to do it. $85 to erase a name?

    Let’s find something else that would apply to everyone to help raise money for the Coast Guard since the Coast Guard is there to protect everyone, not just the people with documented boats.

  6. CaptA

    I think Brian and Timm are correct. Prices are lower are the internet because of the lower costs associated with not having Brick and Mortar stores. Online Retailed response will beto the lower prices on some products to increase volume. All this is doing is providing money into State coffers. I would think everyone in the industry would be for LOWERING taxes nor increasing the TAX BURDEN.

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