Alibaba.com Goes Public September 19, 2014
Apparently a Chinese based company can ship items to the United States at a lower cost than a U.S. Citizen or business can ship a package within the United States. Our postal service has agreements (treaties) which subsidize foreign mail coming into the United States. Read U.S. Postal Service Loophole Gives China the Advantage in U.S. Ecommerce
ALIBABA, welcome to the United States. On behalf of the President of the United States, Steve Womack and the American People, we welcome you to this great VIRTUAL nation. ALIBABA, your VIRTUAL presence is welcome here. Chinese small businesses no longer have to come and have “physical presence” here to share in the American dream. A portion of this language comes from WelcometoUSA.gov.
I read a Bloomberg Article today titled, Alibaba Taps Chinese Diaspora as Global Amazon Battle. The article made me think about Alibaba and how they will be the biggest benefactor of the IMPACT of the Marketplace Fairness Act (Internet Sales Tax) legislation.
The Bloomberg Article showed:
- “Hangzhou-based Alibaba said that part of its international strategy is focused on helping Chinese manufacturers and merchants to reach businesses and consumers across the world, according to its filing.”
- “A consumer in Iowa is wary of buying products from some smaller mom and pop store in Wuhan, so how do you connect those two directly,” said Dawar. “The question is can Alibaba fill that gap, sort of the way EBay has done, through a reputation score system and monitoring of suppliers.”
Alibaba is going to enter the United States with hurricane strength and crush American based retail businesses. Their filing shows they are going to target the USA market/consumer. This will cut out many middleman that import goods from China and resell in the USA. The foreign businesses that sell through Alibaba will also NOT HAVE ANY RAMIFICATIONS FOR NOT COLLECTING SALES TAXES if the MFA passes…
If I were an entrepreneur in China I would want the Marketplace Fairness Act passed. It would give me ANOTHER advantage on price.
An example, a Chinese company selling on Alibaba (who sources their products cheaper) starts selling internationally. The business is located only in China and lists their product for sale through Alibaba and markets their items to customers located in the United States. They then advertise SALES TAX FREE on United States orders. The United States based Internet companies will not be able to compete: 1) on price, and 2) because of sales tax requirements of the Marketplace Fairness Act (if it passes). No sales tax is collected by the Chinese because the business is merely using Alibaba to advertise their products. They have no “physical presence” in the United States, just a VIRTUAL presence. This would be like asking my company located only in Minnesota to charge Chinese sales taxes on items I ship and sell to a person in China. Ya right that will happen….
I predict a major shift in buying habits. More American’s will buy from foreign based companies. Items will be ordered directly from the manufacturer in China. The States that see the Marketplace Fairness Act as their cash cow will still NOT get their sales taxes on these orders. American businesses will lose their sales and their cash flow will drop (to Chinese companies). Therefore, shifting money out of the country and not back into the local economy.
Small Seller Exemption $1 Million in “Remote Sales”
Even if our government tries to enforce state, city, county, and Indian tribe tax collection regulations on a business only located in China they will fail. If I were a Chinese company I would merely invoke the “small seller exemption.” Companies that sell less then $1 million annually in “remote sales” are excluded from collecting sales taxes. If States were able to track the “remote sales” of foreign companies (which is highly unlikely) the foreign companies would merely create another business and hide their interest in the company. The States do not have the resources to audit or collect from a foreign business.
Wake up! Your American Dream might just become just a dream. It might become the Alibaba nightmare.