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Is the “Marketplace Fairness Act” good or bad?

The idea’s been simmering for some time – to allow the states the option to collect sales taxes from all Internet marketing firms, to “level the playing field” supporters contend.

Two bills introduced recently in Congress — the “Marketplace Fairness Act” (S.1832) in the Senate and the “Marketplace Equity Act” (H.R. 3179) in the House would tax remote internet sales. There’s even a third, the “Mainstreet Fairness Act,” floating around in Congress. While the latter bill is expected to fade away, it demonstrates there is higher interest than ever in taxing Internet sales.

Both bills have bipartisan support and solid backing from retailers like Wal-Mart and Best Buy. Even Amazon, the largest internet retailer, reportedly supports the bills, if for no other reason than fear of the monster that would be created if all the states expand their own definitions of “nexus.” Right now, online sellers are required to collect sales tax when the customer lives in a state where the seller has a physical presence – called “nexus.” If these bills pass, the online seller would have to collect sales tax, period.

The retail boating industry has generally favored such legislation because marine dealers, in particular, have seen their accessory business lost to big Internet sellers. Still, many dealers actually sell products on the Internet, for example, via eBay, Amazon and their own websites. Until now, most Internet sales tax proposals didn’t move because they would have triggered draconian bookkeeping and reporting requirements that clearly small businesses couldn’t handle.

These bills, however, exempt small business Internet sales up to $1 million in the House bill and $500,000 in the Senate bill. Plus, they include mandates for simplification, like a single state agency must handle tax reporting, there must be a uniform tax base among state and local jurisdictions within any state, states must even provide compliance software, among other provisions.

Previous bills would have created an impossible compliance management situation for small businesses like marine dealers. These latest bills do more than any other bills to eliminate many complications and seemingly make it possible to move forward.

There are two reasons these bills have Congressional support: First, current law has always given big Internet sellers an unfair advantage over local retailers because they can sell in many states without charging tax. Second, the states are increasingly losing tax revenue as more commerce takes place online! Actually, under most state laws, the customers are currently supposed to report and pay a “use tax” on their Internet purchases. Yeah, I’ll bet everyone’s rushing to do that!
Still, timing may be questionable right now. Does it make sense to promote new sales tax burdens on any businesses during a time when we have a clear national need to see businesses create more jobs, get people back to work bolstering consumer confidence and, therefore, realize the increased economic activity such would bring? What do you think?


9 comments on “Is the “Marketplace Fairness Act” good or bad?

  1. Aaron

    I think this is a long time coming. As a small marine electronics dealer, it’s hard to compete when our sales tax is 7%. That means a $20,000 package costs $1,400 more to buy from us – just in sales tax!

    It’s not a burden on businesses at all. Currently law requires customers to remit “use tax” – but no one does. I hope this passes, and I would like to see the $1m dropped to $250,000 to make sure the fly-by-night internet retailers have to play by the rules too.

    When you also think about the added revenue from this bill, and how that could be used to offset other taxes collected. It’s brilliant!

  2. David Hulbert

    Our unique product, the Portland Pudgy self rescue tender, sells almost exclusively through the internet. A sales tax would definitely hurt our sales. It is difficult enough in a Western world recession to make a go of it, particularly in the boating industry. We do not need more taxes on small buissness.

  3. Timm

    What service are the states providing to the out of state merchant in exchange for making them their tax collectors? Access to the market? That is already guarantied by the constitution. I might be able to support this bill if I could bill the states for collecting their taxes, but for a small business it is just one more layer of red tape. If the small business exclusions were not in the bill, I would have to shut down my stock plan sales as there would be no way my one man business could keep up with all of the tax jurisdictions around the country.

    As a consumer, will this make me shop locally more often? Not at all! I shop online because my local merchants either don’t have what I am looking for or aren’t open during hours when I can actually shop. I am so tired of hearing local merchants who are only open 9-5 on weekdays whining about online sales. Try being open when your customers are off from work! I just yesterday ordered a new MP3 layer manufactured by a large international company online. I had to do it because no one in my area, including the big box stores, the electronics chains or local stores had what I wanted. Is a two hour drive to buy a $75 item still considered local?

    I try to buy things locally first, but if the prices are double what I pay online and you’re not open when I can shop, then you leave me with no choice. I hate to say it, but we may be at a point where many small shops will not be able to compete other than on convenience or service. Forcing their online competitors to collect taxes from 50 different jurisdictions will not save them.

  4. Jody

    I agree with Aaron. Everyone loses the way things are now… Local jobs, brick & mortar retailers losing sales or having to reduce prices so that including tax we can match online prices without tax, the states losing the desparately needed income, etc. I suggested a national internet sales tax to our senators and representatives two years ago. We need to level the playing field somehow. If each state charges their own rate, that will just push people to buy from internet companies in the state with the lowest sales tax. A flat tax nationally would be a more reasonable solution.

  5. Again

    Yes, lets continue to increase the cost of boating. The more people we can eliminate from the sport the less crowded the anchorages and launching ramps will be.

  6. The Management

    This is long over due. As a consumer I love it (not paying tax) when I save 7% just by buying out of state. As a Business Owner I know it kills my sales and destroys my states tax revenue. A simple solution would be as easy as adding a nominal 5% or 6% to All interstate sales. What are they waiting for? It dosen’t need to be complicated. Feds could put the money toward Education or other existing programs that are redistributed to the States.

  7. Craig

    I buy a lot on the internet – more than 99% of the people I know. I even buy some food. But the taxes never influence my decision. I buy stuff on line as I can research it easier and I save time and money getting it. Hear that? Time – in driving and walking into a store. Money in gas and car costs. Prices are just slightly different but when it comes to time and gas money, there is little comparison. And our common efforts through government need this tax revenue badly. I am not concerned about more taxes. I am concerned about spending money towards worthwhile projects, not stupid campaigns in other countries and other crap projects in this country and Chevy suburbans for government officials. Taxing internet sales will happen in the future and that’s all there is to it, but we all need the money now. Spend it on schools and computers and stuff for kids.

  8. Rich

    I don’t have a real problem with the state tax collection providing the process and bookkeeping requirements are not onerous.

    What I have trouble believeing is that SOMEWHERE in that bill, in extremely, fine print is not a provision for the government to add an ‘internet sale tax’ to the total bill. That I would have an extreme problem with.

  9. CaptainA

    I can not believe people are advocating essentially for a Tax increase. How hypocritical. so many people have complained about too much government and taxes! Now when it benefits their own business to put taxes on others–then sure it’s ok. What a joke. The next person that complains about tax hikes and government medaling and advocates for these ridiculous laws should have a have a big Scarlet Letter “H” marked on them for being a hypocrite.

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