The Two Sides of The Internet Sales Tax Debate

The Market Place Fairness Act of 2013 has been in the news much more recently as lawmakers continue to iron out the details of the Act and who will be responsible to pay, what they will owe, and even who they will owe. Recent rulings, or non-rulings as they have been for Amazon in New York have many traditional stores celebrating.

Do not get too excited though, the current framing of the Act by Congress appears to initially target just four and a half percent of online merchants. These same merchants though, make up fifty-seven percent of the total online U.S. Internet sales each year.

Many smaller online retailers see this as a win because they will still be exempt from collecting sales tax from many of their sales, making their sales more palatable to consumers. But this could be a short win for them as many traditional retailers are pressuring their elected officials in Washington to fix this discrepancy.

State officials are also asking for more as they feel their states are losing out on potential monies that they need. In a recent study performed by the U.S. Small Business Administration, it found that of the top one thousand online retailers, only sixteen percent of them collected any state sales tax for all forty-five sales-taxing states.

The existing problem for any online retailer is the 9,600 different taxing jurisdictions currently in place across the country. The Market Place Fairness Act is trying to streamline this to make it easier for online retailers to know not only what to collect, but also who will be collecting it. Until lawmakers can make it easier for online retailers to not only know what percentage of the sale they need to tax across all states, many feel this Act will flounder in D.C.

In the end, the Market Place Fairness Act comes down to states’ rights versus national rights and who has authority to enact which taxes on sales. Without a physical presence in many states, online retailers do not feel they should have to pay taxes on sales to consumers who reside there. They also feel that without a clear-cut tax law in place managing the almost ten thousand various sales taxes, it’s too large of a problem, especially for smaller mom-and-pop online businesses. Brick and mortar retailers feel that they are left on an unequal playing field because their prices must be increased to incorporate the mandated local taxes that online retailers do not.

Consumers are the only winners for now as more and more search out deals online to find the best price they can. Their price shopping may be hurting their local area more than they know though. Local retailers that once depended on their business are closing their doors and the taxes collected on local sales to keep their municipalities running are going uncollected and are forcing more cutbacks in their hometowns.

Where do you stand on this issue? Do you feel there should be a nationwide sales tax for all online retailers? Should there be a tax for just the larger online retailers and allow the smaller retailers to continue business as-is?

Let your voice and opinion be heard, share your comments with us all on our Facebook page or in our LinkedIn group. As more updates come out of Washington, we will keep you up to date.