As a business owner, you know the importance of keeping costs down, while simultaneously providing customers with selection and pricing that will allow your business to remain competitive in the market. That is why it is crucial for you to be familiar with the Marketplace Fairness Act of 2013 (S. 336/H.R. 684) and understand the impact that it will have on your business, before the U.S. Senate votes on it in the next few days.
If the Marketplace Fairness Act of 2013 is passed, online retailers will be required to collect and remit sales taxes for upward of 10,000 unique tax districts, across the United States. Currently, states can only require a business to collect and remit sales and use taxes and returns, for tax districts within their borders, if that business has a physical presence in the state. This new legislation, if passed, would extend the states’ authority to collect sales tax on remote transactions, as well.
What will it mean for your Ecommerce business, if the Marketplace Fairness Act of 2013 is passed?
- Increased overhead costs associated with calculation, collection, and submission of sales taxes
- New sales tax reporting requirements for as many as 46 separate taxing entities
- Increased risk for tax audits and lawsuits
- Potential loss of sales resulting from imposition of these taxes on consumers
- Potential loss of sales resulting from increases in retail pricing, made necessary by increases in overhead costs
- Competitive disadvantage, in marketplace, to bigger companies with the resources to accommodate these new requirements
This new legislation is, to say the least, an incredibly laborious and costly prospect for any business, but especially for smaller online retailers with limited resources. Legislators recognize this, and have included a “Small Seller Exception,” but it’s not nearly enough. While the Internal Revenue Service considers a small business to be one with $20 million in annual revenue or less, and the Small Business Administration has a cutoff of $30 million, the Marketplace Fairness Act’s small business exemption threshold is only $1 million.
Expanding the Internet sales tax exemption to include small businesses with less than 50 employees, or less than $10 million in annual out-of-state sales, would be a reasonable modification, to the bill, to protect the jobs and competition created by small online businesses.
Protect the future of yours and other small online businesses by making your voice heard. Contact your U.S. Senate and House representatives, today. Don’t wait! A vote in the U.S. Senate is expected to take place any day.
Miva