There’s nothing fair about the Marketplace Fairness Act – it will crush small businesses

by 1389 on April 30, 2013

in 1389 (blog admin), e-commerce, taxes, U.S. Senate and Congress

But then, punishing those pesky, freedom-loving small business owners isn’t a bug – it’s a feature!

Boston Globe: Everything to fear in Internet sales tax

If truth-in-labeling rules applied to Congress, the proposed law giving states the power to collect sales tax from out-of-state online retailers would be named the Marketplace Unfairness Act.

Sponsored by Wyoming Senator Mike Enzi and fast-tracked to the Senate floor this week, the legislation would strip away protections that have been in place for decades, unleashing tax-hungry states on merchants to whom they aren’t answerable and tilting the playing field against small Internet retailers.

Under existing law, any state can require businesses within its borders to collect sales taxes from their customers. That applies to shops on Main Street as well as to vendors doing business by mail and over the Internet. If you’re a seller physically operating within the Commonwealth of Massachusetts, for example, part of your job is to collect the requisite Massachusetts tax each time you ring up a sale in the state. At the same time, you can’t be conscripted into serving as a tax collector for states to which you have no physical connection. The Supreme Court has repeatedly affirmed that merchants must have a “substantial nexus” with a state — such as offices, a warehouse, or a sales force — before they can be compelled to collect taxes on that state’s behalf.

In practice this means that a brick-and-mortar retailer only has to calculate the sales tax charged by its own state. A bookstore at the Cape Cod Mall collects the Massachusetts sales tax of 6.25 percent; it makes no difference whether the customer at the cash register lives across the street or across the country. Online and mail-order retailers play by the same rules: If they have a physical presence in Massachusetts, they’re responsible for any sales tax payable to Massachusetts. Neither traditional retailers nor Internet retailers are obliged to collect taxes for states they don’t operate in. Fair’s fair.

But if Enzi’s bill becomes law, fairness goes up in smoke. Online merchants would become revenue collectors for every sales-tax jurisdiction in America — an estimated 9,600 of them, each with its quirks and quiddities. No longer would Internet retailers based in Massachusetts be liable only for sales taxes owed to Massachusetts. They would have to calculate and remit taxes owed to Tennessee and California and Wyoming and New Jersey, charging different levies for different customers, and somehow keeping up with the ever-shifting kaleidoscope of sales-tax rates, definitions, exemptions, and deadlines.

Yet the owner of the brick-and-mortar shop around the corner would go on as before, charging only a single tax rate and remitting taxes to only a single state.
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Story here.

What our Founders fought for

“I have come up with a new national symbol for the United States. I think we need to junk the eagle and come up with a symbol that is more appropriate for the kind of government we have today. We need to replace the eagle with a huge sow that has a lot of nipples and a bunch of fat little piglets hanging on them, all trying to suckle as much nourishment from them as possible.”

—Rush Limbaugh, The Way Things Ought to Be

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