States And Congress Out To Tax
Depending on where you shop you may or may not be taxed for your online purchases, but if the Sen. Richard Durbin (D-Ill.) introduced ”Main Street Fairness Act” makes its way to law-dom an e-tax could become the standard.
For years retailers were only required to tax consumers residing in states where they maintained storefronts. But that practice comes at a price, literally, to the states where they don’t exist. Apparently sales reporting is at the discretion of the consumer. If we all reported our online transactions via tax return we’d be responsible for the fees we dodged online, during tax season. Who knew?
Well, the states knew. And they’ve been grumbling over the revenue they are losing each year. Yesterday the Washington Post reported that from 2011 alone, Virginia could have collected $423 million, Maryland $376 million and D.C. $72 million.
Also rallying for the online tax are local businesses in competition with their web counterparts. If you’ve ever “shopped” for your items in-store and then made your purchase on the net, you’ve contributed to the much maligned “showrooming” effect.
“You’ve been doing all of the work and then the online competitor steals the sale,” David French, senior vice president of government relations at the National Retail Federation told the Post.
With so much money at stake, why has the process of regulating online taxes taken so long? Quite simply, because it’s complicated. Smaller businesses have long rejected the notion of keeping up with the varying rules and percentages.
“The burden falls disproportionately on a small business,” Steve DelBianco, executive director of e-commerce trade association NetChoice told the Post. “It has no accounting or IT staff to keep track of tax rules and holidays.”
But big business supports the bill as well, namely online retail giant Amazon. After a series of state battles over what constitutes as physical presence, they’ve become a proponent of regulating the process.
“We strongly support passage of the Marketplace Fairness Act because it’s time to resolve the sales tax issue,” said Amazon spokesman Scott Stanzel according to the Post.
The Post cited the National Conference of State Legislatures projection that a uniform e-tax could generate $23billion dollars in revenue every year. That is, if we all continue shopping. Researchers are quick to point out that states struggling in this economy need the boost, but what are these states comprised of? Residents, who are also struggling to make ends meet. It’d be interesting if the tax prompted a decrease in sales rather than the anticipated increase in revenue.
Yesterdays Washington Post article also points out that there are only five states in the United States that maintain a zero percent sales tax. All remaining forty five states require residents to self remit sales/use tax on their out of state purchases including those made on the Internet. For over fifty years 45 states with sales/use tax laws have always been required the self remit.
So what is changing/
Congress is certain to pass S.1832 the Marketplace Fairness Act. Over the past decade Congress has been wrestling with enabling States’ rights to choose enforcement of their existing sales/use tax laws.
My wife and I own and operate a small online business benefitting greatly from technological innovation and scalability made possible by Cloud Computing. Until recently we were struggling with legacy tax procedures in our home state. The administrative burdens and expenses complying with States’ tax laws became onerous forcing me to search the Internet for a solution. What I found seems, to many, unbelievable.
My company now employs free technology hosted on Amazon’s Ec2 cloud infrastructure enabling my company to easily calculate, collect and remit sales tax in any jurisdiction for any state. TaxCloud seamlessly integrates with multiple payment platforms and shopping carts eliminating unnecessary administrative burdens. Now my tax processes are automated and efficient.
3dcart CEO Gonzalo Gil states:
“As another building block in our effort to ease the management process for online store owners, TaxCloud is the kind of efficiency application that is practical now and helps you plan for the future….this represents another way that automation is saving time and money for online retailers.”
Technology now freely available to any size business easily handles sales tax processing for any jurisdiction in any state. As Mr. Shay from the NRF points out it is now easier for businesses to process over 10,000 different tax jurisdictions than deal with the multiple complexities involved with shipping. Furthermore, the ICSC has discovered an average of 90% of Internet consumers desire to have sales tax collected by merchants at points of purchase instead of having to track and remit use tax individually. Governments also realize sales tax automation ensures more of every tax dollar funds intended programs.
I strongly support and urge Congress to immediately pass S.1832 the Marketplace Fairness Act granting states the choice to efficiently enforce their existing sales and use tax laws. Individuals, businesses and government will all benefit tremendously utilizing the efficiencies made possible by new technologies coupled with the power and scalability of Cloud Computing.