Marketplace Fairness Act Questions

Question: Won't this raise my taxes? Is this a new tax?

No.

Consumers are required under existing state laws to pay sales and use taxes on the goods they purchase, but online sellers simply are not required to collect the tax in the same way that local businesses do – which puts local businesses at a disadvantage. Consumers can be audited and charged with penalties for failing to pay sales and use taxes, but too often states are unable to enforce this requirement.

Question: Will this help my business?

Yes.

Thousands of businesses are forced to do business at a competitive disadvantage because they have to collect taxes and online sellers do not, which in some states can mean a 5 to 10% price advantage.

Furthermore, if your business already sells in multiple states, you can now easily rely upon completely free services available on the internet to manage all of your sales tax management needs.

Question: Will this help my state?

Yes.

The Marketplace Fairness Act allows states to collect sales and use taxes in one of two ways: states can collect under the Streamlined Sales and Use Tax Agreement (SSUTA) or they can adopt minimum simplification requirements. States have the option to choose the best solution for them, and not be required to conform to a one-size-fits-all model.

For more information, see "What is the Marketplace Fairness Act" description, or review the bill itself.

Question: Will small businesses be protected from these new requirements?

Yes.

Online sellers with less than $1,000,000 in remote sales annually will be exempt from collection requirements. Remote sales are sales to customers in states where the seller does not already have a physical presence.

Furthermore, any seller (regardless of remote sales volume) can easily rely upon completely free services available on the internet to manage all of their sales tax management needs.

Question: How much is at stake?

Good question.

For the past 20 years, states have been unable to enforce their own sales and use tax laws on sales by out-of-state, catalog, and online sellers due to the 1992 Supreme Court decision Quill Corp. v. North Dakota.

Congress has been debating solutions for more than a decade, and some states have been forced to take action on their own, leading to greater confusion and further distorting the marketplace.

On average, states depend on sales and use taxes for 20% of their annual revenue. At a time when state budgets are under increasing pressure, Congress should give states the ability to enforce their own laws. Internet-based commerce continues to grow, and states will be unable to collect as much as $23 billion in revenue in FYE 2012 alone unless Congress enacts the Marketplace Fairness Act at once.

Question: Why should retailers that don't benefit from the tax have to collect it?

This is a red herring.

This argument would make sense if the online retailers were paying, not collecting, sales tax. But that's not the case. It's the retailers's customers who are paying sales tax, and they do benefit from the firefighters, police, libraries, and more that sales tax revenue helps pay for.

Online retailers pay taxes wherever they're located to help pay for the services that their offices benefit from. All that has absolutely nothing to do with whether or not they collect sales tax. Collecting sales tax is—or rather should be—simply part of selling online, just as it's part of selling on Main Street.

To sum up: As a consumer, the sales tax you pay funds projects and services in your community. That's as it should be. Collecting sales tax? That’s just part of doing business.