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Marketplace Fairness Act is a political hot potato

Dealers have wanted for years to “level the playing field.” Now, the Marketplace Fairness Act has passed the U.S. Senate and its prospects for becoming law are looking good — or are they?

Let’s get real. While it’s not garnering much news coverage, collecting tax on Internet sales is, in truth, such a political hot potato that it might never emerge from the House Judiciary Committee.

“It’s been an important issue for us for a long time,” Marine Retailers Association of the Americas president Matt Gruhn said. “The sales tax holiday for Internet retailers is clearly a major disadvantage to our Main Street marine retailers. It gives Internet sellers a 4- to 9 percent price advantage over local stores, so we are pushing hard for passage of the Marketplace Fairness Act.”

It’s the nation’s retailers against the anti-taxers. The former claim it’s simple fairness while the latter call it a new tax. Is it? The answer is “no” if you realize that existing law already requires all taxpayers to cough up unpaid sales or use taxes on all Internet purchases when filing their annual state tax return. Is everyone doing that? Hardly. So, in that sense the answer is “yes,” it’s a new tax — if you have to pay what you’re avoiding now, that is.

Politically, this issue is clearly a Catch-22. The bill passed the Senate by a margin of 69-27 with the majority of Democrats voting for it while Republicans were split with 21 yeas and 22 nays. In the House, the Republican majority is also split. There, voting on the bill will force them to take sides either against the retail business owners in their districts or against their party’s conservative base. Somebody’s going to be mad.

To further rattle nerves for the House majority, the Americans for Tax Reform, headed by anti-tax advocate Grover Norquist, is opposing the bill. Norquist claims a vote for the bill will be a violation of the “no new taxes” pledge many House Republicans signed.

Norquist is dead wrong. Paying tax on Internet sales is already a lawful tax that is due. The fact that people ignore it doesn’t negate it. Moreover, the bill does not mandate some new national tax, but only gives the states the option to require Internet marketers to collect the appropriate sales tax just like local brick-and-mortar stores must do now.

Further, for years opponents have argued that it would be too hard for online sellers to calculate proper sales taxes for thousands of cities, counties and states. The bill now addresses that by requiring any state that opts to require sales tax collection to provide the online sellers with free software that calculates the correct taxes. Gruhn correctly points out: “That argument no longer applies. Today, software has been developed which has eliminated the difficulty of calculating and remitting sales taxes for state and local jurisdictions.”

What’s it going to take to see this passed this year? The short answer is: your engagement. The long answer is: many members of the House (especially Republicans, but some Democrats, too) are lying low about their position. We can assume they are waiting to see where the most pressure might come from. Or they know if the bill comes up for a vote, they will have to make a choice between the best interests of small brick-and-mortar businesses and political expediency.

Accordingly, if you believe in the Marketplace Fairness Act, you must communicate to your representative that passage of the bill is long overdue . . . that it provides for equality in tax collections . . . that it’s absolutely not a new tax as opponents say and it does not violate any no-new-taxes position . . . and that it merely provides for the collection of sales taxes already due, but going uncollected now.

Remember, not hearing from you lets the bill’s opponents dictate the game.


5 comments on “Marketplace Fairness Act is a political hot potato

  1. Brian

    I disagree completely with your comments. Online retailers should not be forced to come up with a plan to pay sales tax to each and every state. It is an accounting nightmare.

    Have you seen the software or the program that will be used ? How can you make a statement that it will even the playing field.

    The way to even the playing field is through exceptional customer service which is severely lacking in many dealerships these days. Especially if you come in for service but didn’t buy your boat from that dealer. You are put at the back of the line and will wait longer for your boat to get serviced. Many dealers will actually tell you this up front.

    Even if the law passes, brick and mortar businesses will still have to compete on price while carrying much more overhead so the playing field will never be equal.

  2. Chriss

    Why not let the States do what they should have been doing in the first place and collect their own taxes. Why lay the burden on the Retailer. For that reason I do not support this Act, its one more way to add cost to overhead and this all trickles down to the consumer anyway. So who are we kidding. States – Do your job & collect your own DARN taxes!

  3. Jody

    As usual, everything comes down to politics. The people who have benefitted from not having to charge sales tax so far (and buyers who haven’t been paying it) should consider themselves lucky to have gotten away with it for so long. Brick & mortars have to compete with online pricing, plus have customers tell us we have to eat the sales tax too if we want the sale. On top of that, customers want the convenience of walking in and finding it in stock, and they want the level of customer service you don’t get with most online companies. It’s time for a reality check. We’re glad to see at least someone is trying to level the playing field. And it’s not just brick & mortar retailers who have been hurt by no-tax internet sales. The states should have been all over this issue, with the millions of dollars they’ve been losing in sales tax income. The economy would benefit from this, but the same people who complain about the economy don’t want to pay their fair share. What is it going to take for the politicians to realize implementing online sales tax is a positive move, not a negative one? Keep local businesses in business, keep local jobs, keep local shopping convenience, support local and state economies.

  4. Steve Gibbs

    If the Marketplace Fairness act passes, the only looser is the consumer. The choice the consumer has is buy on the internet and pay for shipping and wait or choose to buy from a far smaller selection and pay tax and get it now. I think it looks pretty even from a consumer’s point of view. Passage may drive some sales back to the brick and mortar retailer but is speculation. In truth it may be too late to save brick and mortar. The in store selection is growing smaller every day. Big Box Stores have edged out most independent retailers. This in effect greatly reduces the number of buyers selection products to offer. Made in America does not exist in Big Box Store Selection. Quality products with lower margins also are not going to be an option. This action is much too little too late. Consumers are already aware that they get better selection on-line. Their only option becomes settle for less and pay more.

  5. zyxw

    Tax accountants and lawyers are drooling over the prospects this bill will pass. Every online retailer will be subject to the rules and regulations of 50 different states, even if your business is located in a state that doesn’t collect sales tax. Imagine trying to comply with the schedules, audits, and rules of all those states. Right now there are around 9-10,000 different taxing jurisdictions, but the law does require that each state participating create a uniform set of rules and rates for the entire state. That’s the good news. The bad news is that you will still have different sets of rules to comply with. For example, clothing under a certain price is exempt in some states, but not in others. And when the auditor from across the country calls you up to prove you haven’t been selling clothing tax exempt into their state you will have to answer. Amazon and the biggies love this bill too, because they know it will create a huge financial and manpower burden on smaller competitors.

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