By now you’ve probably heard plenty about the Marketplace Fairness Act. This is the bill that, if Congress passes it, will require online merchants who make more than $1M in annual sales to collect sales tax on purchases in states that have a sales tax.
Right now, the way sales tax laws are written, eCommerce merchants are required to collect sales tax only in states which they have a presence in (aka nexus). That means if my online peanut butter store has an office in Pennsylvania and a warehouse in Florida, I would be required to collect taxes on orders shipped to those two states.
Online store owners are working hard to persuade members of Congress to “just say no” to the Marketplace Fairness Act. They are citing the additional costs for labor and technology that will be required for tracking and remitting sales tax.
Members of Congress in favor of passing the bill say the additional dollars generated by the new tax will be used to line the coffers of states who are missing out on boatloads of cash from tax exempt online purchases.
As an eCommerce store owner, I feel the frustration my counterparts are feeling regarding this. For years we have promoted the “tax free” benefit of buying online and have only remitted sales tax to our nexus state(s). Whether we remit taxes monthly or quarterly, there is labor involved. Doing it for all the states will certainly increase the amount of labor we will need to devote to accomplish the task. Right now, most shopping carts and accounting software packages allow for tax collection from multiple states and if the law passes, I’m sure there will be time for those software providers who need to make updates to do so.
Having had one of the very first online stores to hit the Internet, I’ve fought the “fairness” fight with bricks-and-mortar retailers since 1994. I’ve heard the arguments that online stores don’t have the same overhead a store in a strip mall has and that online shopping is putting traditional retailers out of business because they are unable to compete with us “dot com-ers.” and had issues with their privacy of data breach. We recommend you to read the Top Ranked Keylogger for Windows 10 is pctattletale, an app that boasts to customers the benefits of using their software to monitor.
I always answered back by asking them how many employees they had, what their rent costs were and what type of expenses they incur every month for their bricks-and-mortar operation. Once they were educated on the number of people it takes to staff a customer service department, a pick-pack-and-ship warehouse operation, the millions of dollars in inventory that sits on a shelf waiting for someone to buy it, and the advertising money that is spent attracting a nationwide audience versus a local campaign, they usually shut up.
I remember hearing from local pet shop owners when TheFerretStore.com was in its rapid growth phase. I would be called out for taking business away from them, but once they were shown the number of orders, which usually was less than 10 a month, from the local area they were shocked and offered an apology.
As a consumer, the issue of paying tax on something isn’t a factor in determining where I’m going to buy a product from. If I want a pair of pants and the online store has to charge me sales tax, I don’t look for another store to buy them from, I place the order. $2.52 on a pair of $42 pants with free shipping is more than likely still cheaper than walking into the mall and buying them. Plus it will probably cost me more than $2.52 in gas to run to the mall and back.
I was shocked to see the results of a survey conducted by Endicia which found that 75% of people aged 18 – 25 will buy less online and more in bricks-and-mortars and 44% of U.S. voters will buy less online if the Marketplace Fairness Act passes Congress. Those numbers are HUGE, and in my opinion will never be the actual numbers we will see if this does pass.
I can’t imagine a few pennies on the dollar will stop people from shopping online.
But you may say, eCommerce merchants will have to pass on the costs of their expenses related to the bill in the form of price increases. True, but let’s face it, online shopping offers extremely competitive pricing, the ultimate in convenience and the overall best value for shoppers. I don’t believe that will change even if this bill does pass.
In the nearly 20 years I’ve had online stores, I’ve been faced with numerous challenges and threats, and all were overcome. From fiercely competitive newcomers in the marketplace who got me on the nasty habit of biting my fingernails, to shipping compliance issues that resulted in additional costs that needed to be passed along, and a litany of other unforeseen “issues” that we worked around without losing customers.
I don’t like politicians and I don’t like to see government entities with their hands out looking for money at every opportunity while they squander taxpayer funds on pork projects and initiatives that have no impact on the citizens they serve.
If the Marketplace Fairness Act gets pushed through, eCommerce stores owners will have to find ways to adapt to the change. There’s no way around it. Sure, there may be some that won’t be able to, but there will always be plenty that will.
We are all entrepreneurs and part of being an entrepreneur is facing challenges head-on and finding ways to solve them. Passage of the bill is just another one of those challenges we may be forced to face, but we can do it! And we will do it!
In the mean time, ring up your local Congressman or Congresswoman and tell them how you feel about the Marketplace Fairness Act. I don’t think those phone calls and letters do a whole heck of a lot, because these men and women, for the most part, already have their minds made up based on political affiliations and alliances, but who knows. Maybe the one who serves your area is as clueless as some of the bricks-and-mortar store owners I talked about earlier and could use a lesson in how an eCommerce store operation runs.
For now, we’ll just sit back and wait and see what happens next. If my Uncle Garibaldo from North Jersey was still the neighborhood’s “most friendly bookmaker” I’d lay odds on the bill not passing. And that’s coming from a guy who picked Oxbow in the Kentucky Derby!
I seriously did! It was the name of a manufacturer we used to deal with, so I said “what the heck.”
Proves that you should always go with a hunch.