The United States Congress is in the process of passing a new bill, the Marketplace Fairness Act. The law requires all Internet retail businesses to collect the sales taxes on their transactions. While this looks like a means of leveling the playing field between online retailers and brick-and-mortar stores, it ultimately punishes both the online retailers and the purchasers of their items. This bill will also ultimately drive up costs of purchases both from those brick-and-mortar retailers.
In the Internet’s infancy, the United States Congress, enacted a carve out that exempted online retailers from having to collect state and local sales taxes, in states that they are not located. This exemption has been a sore spot for both the brick-and-mortar retailers, and state and local taxing agencies. The short-changing of taxing agencies often occurs,because the purchaser fails to report those online purchases, and those sales taxes go uncollected. Also, the brick-and-mortar store owners think that they are at a disadvantage as they have the expenses of their buildings, employees, and local taxes. With the increased prices of online goods these brick-and-mortar stores will raise their prices too. The reality, Internet retailers do have a physical locations for their goods, they do have employees to take orders and ship items, and those employees have longer hours because they cross many more time zones. The playing field is a lot more level, than the brick-and-mortar stores think it is.
The new Internet sales tax bill will turn all online sellers into unpaid tax collectors for all the 650 odd state and local sales tax authorities. This will radically drive up costs for those online businesses. Those online business will have to comply with collecting sales taxes, then forwarding those collections to all proper taxing entities. Small online business will find this a nightmare, not just because of all the different rates involved, but the different reporting periods, securing licenses in all the districts, the accounting nightmare for compliance, the need to open many more bank accounts (as many of these taxing districts do not allow co-mingling of funds), etc. Costs will rise far more than just the cost of the collected tax .
This sales tax bill poses a particular problem for online auction sites, as they are just product aggregators. Unlike most Internet retailers the online auction does not own, take possession of, take payment for, or ship any of the items on their site. Exceptions of note, penny auctions – where the auction does on the items, and eBay, where through PayPal, they actually do take payment for the items and sends the rest of the money to the seller. The normal online auction site only offers a place f item viewing and bidding. The bill as written makes no distinction for these sites. Further, it does not truly address the online want ads like Craig’s List and Backpage.
The economy is frail, and is approaching stagnation. Businesses do not need more regulation and taxing, this will lead to slowdowns . Furthermore, it will cost consumers more for all their purchases, and the cost will exceed just the sales tax price. If you do not want to pay more for everything, contact your Congressman, and tell him please vote against the Marketplace Fairness Act.