Imagine waking up and discovering that you are now the tax collector for the government, because the government does not want to do it themselves. You have now become the living dead, you are obligated to calculate and collect and pay taxes in 46 states, six territories, and more than 500 Native American Tribal Nations. And you are personally liable for any errors. So the tax authorities can seize your personal assets, your house, and your bank accounts. And you have no one to represent you if there are any disputes. And that just to try to comply with the law you will need to pay tens of thousands of dollars per year to another company to help you with the calculating and filing of the taxes.
I think that anyone would agree that qualifies as a nightmare.
Unfortunately, this is exactly what the pending US House of Representatives legislation so inappropriately named the Marketplace Fairness Act (MFA) governing sales tax on internet retail sales would do to many small businesses. The legislation is being supported in a big way by cash hungry state legislatures, “Big Retail” led by Walmart and Amazon, and sales tax software providers.
On the surface, it sounds very reasonable to require everyone to pay sales tax and operate under the same rules – a “level playing field”. But do not be fooled. This legislation, which has been supported by tens of millions of dollars paid to lobbyists
(and contributed to elected officials) by the Big Retailers, is really an attempt by the online Goliaths to squash the Davids of the retail world by imposing crippling costs and burdens upon the small retailers.
If the law proposed a uniform national sales tax that everyone would collect and owe equally, and pay to one entity, the law would meet with little objection from small businesspeople (like me). I have no problem collecting and paying sales tax. I have always done so in the state where my business is located, which has always been the law of the land in the US. But the proposed legislation, which was pushed through the US Senate without any proper debate or discussion, would require all online retailers to calculate, collect, and file sales tax for 46 states. And the lobbyists in favor of the law say that is not a problem because all the states are going to supply “free software” that the small businesses can just plug into their business ecommerce management systems that will take care of everything. Can anyone who has ever even used a computer believe that would have any chance of working? Few if any small businesses would have the technical ability to integrate the software into their order management systems. In most cases, the “free software” would simply be incompatible with their order management systems.
But according to the Big Retail lobbyists, that should not be a problem either, because there have recently arisen a number of venture funded service providers (who stand to make millions) who will be happy to provide that tax calculation and collection service to small businesses like mine and only charge me tens of thousands of dollars per year. In addition to thousands of dollars more they will charge in setup fees. And plus any integration costs that might be necessary (which there certainly would be). And at present the software does not even work with many popular order management systems or common accounting programs. (so what would a business do…. These software firms, who stand to make millions if the law passes, have been spreading misinformation and outright lies about how easy their software is to install and use. Who should be believed, the ones who stand to profit immensely if the law passes, or those who will be hurt by it?
So the cost of compliance for many small internet retailers, if even technologically feasible (which is dubious), would be huge. And to add insult to injury, for many small businesses the annual cost to calculate and file the taxes would likely be even more than the amount of taxes that they would be collecting each year. That is incredibly inefficient from a public policy and tax collection standpoint. Because of these costs and burdens, the American Association of Attorney Certified Public Accountants (who would stand to benefit greatly from increased business opportunities if the law passed), have come out strongly against the MFA. In their view, the law would place crippling burdens on thousands of small businesses and would force many out of business.
And even with the “help” from the expensive tax calculation and filing service providers the law would expose small retailers to audits in 46 states, six territories, and more than 500 Native American Tribal Nations. Anyone who has ever been through an audit can tell you even if you keep good books and are totally honest, a single audit can take days if not weeks of your time. How could anyone be expected to manage or grow a business under that type of burden?
One of the most frustrating aspects of this proposed legislation is that a good argument can be made that the law is simply not needed – the truth is that sales taxes are already being collected on the vast majority of internet retail sales. At the present time, internet retail sales account for between 6 and 8 percent of all retail sales. That is all. And according to James Gilmore III, the former Chairman of the Congressional Advisory Commission on Electronic Commerce, more than 80 percent of online sales are made by big box retailers who have physical presence in most if not all states. So they are already collecting sales tax now on those sales. The online retail world looks more and more like the offline retail world, dominated by the Big Retailers. So what is left? The remaining less than 20 percent of online sales – maybe 1 percent or less of total retail sales! That’s what this legislation is all about – the last 1%, which is mostly sold by small businesses. And those sales are already taxed through state use taxes which are supposed to be paid by the consumers, but the states usually choose not to collect them or pursue the consumers because it is politically unpopular. That’s now what they want the small businesses to do for them!
Big Retail says the law is necessary to “level the playing field” and has worked hard to convince small brick and mortar businesses that the Big Box down the street is not who has been undercutting them on price and putting them out of business for years, but rather small online retailers are. Online small businesses are not at odds with small brick and mortar stores. In fact, many of them are hybrid businesses that sell both online and in-store and started selling online to try to survive the assault from the Big Boxes. Selling online is how they survive!
Most small internet retailers would argue that the playing field is tilted against them now because internet retailers have to pay shipping for all of the orders that they sell, which in most cases is greater than sales tax would be on a purchase. They already have to absorb that cost. So internet sellers already have a price disadvantage as compared to brick and mortar stores. In addition, Big Retailers enjoy huge tax breaks from local governments and volume based reductions in shipping costs from UPS, Fedex, USPS, etc. that give them a big cost advantage over small retailers.
The law as it is currently proposed exempts businesses with less than $1 million in annual online retail sales – not profits, but total sales. That threshold is ridiculously low. The costs of complying with the law could wipe out most if not all profits for businesses near the threshold. As anyone who knows anything about business can tell you, $1 million in total sales is a very small business, and that threshold would still subject most mom & pop sized online businesses to the costly and burdensome requirements. It would only exclude the tiniest of businesses and the casual ebay and Craigslist sellers. The proponents of the law like to say that the $1 million threshold exempts 99% of all online businesses. Poppycock. They are including in that figure any individual who has sold anything on sites like eBay and Etsy and Craigslist. Those are not businesses, those are casual individual sellers (think yourself, your mother, your friends, your grandma, etc), NOT businesses who are selling things online for their sole means of support and who hire and employ people, who rent space, who advertise, who have business licenses, who pay local business income, sales, unemployment, and personal property taxes.
The law would deter people from starting businesses, and it would be a growth killer. No business would want to grow past the $1 million sales threshold and subject themselves to the collection, reporting, and audit costs. I have spoken to many business owners who are seriously considering laying people off and shrinking their businesses to get below the threshold if the law passes because they are so afraid of the compliance costs and risks. That would be tragic for those business owners, their employees, their local communities, and the United States economy. It is just what Big Retail wants.
The MFA is bad legislation. It is not fair, it is not needed, it is bad for competition, for jobs and economic growth in our communities, and should not be allowed to become law. Note: This article was not written by me. It was submitted by a third party as an anonymous post.
Top Ten Reasons why the Marketplace Fairness Act (MFA, H.R. 684) is not fair!
Please do not impose this crippling burden on small businesses! Note: This articles was not written by me. It was submitted by a third party as an anonymous post.
Originally posted on Marketplace Fairness Act:
How did “Main Street” help promote Wal-Mart’s agenda to crush small business? Were “main street” organizations deceived by BIG business interests like Wal-Mart? Did they know they were being used in part of a scam to deceive politicians and consumers on issues pertaining to the Marketplace Fairness Act (MFA) aka the Internet Sales Tax?
Earlier this week I helped expose an organization called Stand with Main Street aka Alliance for Main Street Fairness as a front for BIG business. The article titled Main Street Images Used to Deceive Politicians and Consumers: Marketplace Fairness Act shows that Wal-Mart, Target, Auto Zone, Best Buy, Home Depot, and Sears (source Wikipedia) created Stand with Main Street for political and monetary gain. These BIG business interests through their lobbyists put up a website and Facebook Page (Stand With Main Street) that looks like downtown “main street” and they used small business owners as the spokesman for their agenda.
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Please provide comments to this post so we can discuss this issue further. This is just a theory I have been thinking about, maybe I am wrong, but then again maybe I am right. What are your thoughts?
Let me know anyone’s thoughts. How does someone bring a court case up claiming their constitutional rights have been violated? Would this type of case merit a Supreme Court review if brought forward? I think it is clear cut that people purchasing from a voluntary seller are being forced to pay taxes to a place (when it comes to Gifts) where they have no representation.
Certified Software Providers
Also, are the Certified Software Providers (CSPs) that set up the software that voluntary sellers are using violating my rights? The CSPs are profiting off of the unconstitutional collection of my sales taxes on the gifts I have shipped to another person. How many millions and millions of dollars have been collected for the sale of GIFTS in violation of the U.S. Constitution, i.e. “no taxation without representation?” As of 1 July 2014 there are 2225 active accounts registered on the SSUTA Registration System.
Language in the Marketplace Fairness Act (MFA)
MFA shows this (7) SOURCED- For purposes of a State granted authority under section 2(b), the location to which a remote sale is sourced refers to the location where the product or service sold is received by the purchaser, based on the location indicated by instructions for delivery that the purchaser furnishes to the seller. When no delivery location is specified, the remote sale is sourced to the customer’s address that is either known to the seller or, if not known, obtained by the seller during the consummation of the transaction, including the address of the customer’s payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. A State granted authority under section 2(a) shall comply with the sourcing provisions of the Streamlined Sales and Use Tax Agreement.
I assume this part “based on the location indicated by instructions for delivery that the purchaser furnishes to the seller” in a gifting scenario would mean the recipient’s address.
Here is a graphic that shows my theory in a simple manner. Many of you might have seen me post this before but comments are appreciated.
Today I read the Tax foundations article titled: “The Marketplace Fairness Act: A Primer.” It was written on July 14, 2014, by Joseph Henchman. After reading the article it left me wondering why the author failed to point out that the Marketplace Fairness Act IS TAXATION WITHOUT REPRESENTATION (in my opinion).
Henchman is attacking Hybrid-Origin Sourcing (HOS) and it appears that he thinks the MFA is a better solution. Here is a brief portion of his article here:
“HOS Leads to Taxation without Representation
Instead of consumers paying taxes to their state of residence where they live and vote, under HOS, purchases would be taxed by other states where the consumer may have little or no connection. For example, a California resident purchasing an item from a Pennsylvania seller would owe Pennsylvania sales tax based on Pennsylvania taxability rules. (The rules are not intuitive: Pennsylvania taxes soft drinks and exempts clothing; California does the reverse.) Pennsylvania would therefore expand the scope of its tax system to consumers all over the country, as would each state. A system where states are able to tax the residents of other states sets up worrisome taxation without representation problems. The California consumer has little power to choose representatives or influence Pennsylvania’s tax policy, but his or her purchases are subject to it. HOS perhaps ignores this problem by claiming that the businesses are the actual taxpayers, but the HOS proposal also has businesses collecting taxes for states where they have no physical presence.”
Here is my take on the Marketplace Fairness Act (MFA) using a similar analogy:
MFA Leads to Taxation without Representation
Instead of consumers paying taxes to their state of residence where they live and vote, under MFA, purchases of GIFTS would be taxed by other states where the consumer may have little or no connection. For example, a Colorado resident purchasing a GIFT from a Minnesota seller and having it shipped to his mother in Iowa would owe Iowa sales tax based on Iowa taxability rules. Iowa would therefore expand the scope of its tax system to consumers all over the country, as would each state. A system where states are able to tax the residents of other states sets up worrisome taxation without representation problems. The Colorado consumer has little power to choose representatives or influence Iowa’s tax policy, but his or her purchases of GIFTS are subject to it. MFA perhaps ignores this problem by claiming that the businesses are the actual taxpayers, but the MFA proposal also has businesses collecting taxes for states where they have no physical presence.
I tweeted my concerns to Joseph Henchman about his article. Here is our exchange:
@EBlankets MFA says “whereitem is received by purchaser” & if that is not applicable, billing address. So MFA would source that sale to CO
— Joe Henchman (@jdhenchman) July 15, 2014
@EBlankets MFA plans for that eventuality, defaulting to billing address if there is no shipping address where the purchaser receives it.
— Joe Henchman (@jdhenchman) July 15, 2014
@jdhenchman Does the purportedly “freesoftware” do this today? If not, SSUTA volunteer collectors are violating constitutional rights.
— Internet Sales Tax (@EBlankets) July 15, 2014
MFA Leads to Taxation without Representation
So under the current MFA language this my scenario. A business located in Oregon (where they have no sales tax) purchases laundry bags from a Pennsylvania seller and has the items shipped to his other business location in Minnesota. Under the MFA (if destination sourcing is applied HOW MFA IS CURRENTLY WRITTEN – NOT “EVENTUALLY” WRITTEN) this business would now owe Minnesota sales tax based on Minnesota taxability rules. That appears fair, right? Since the business has physical presence in Minnesota too. Lets examine this now using Henchman’s tweet, “MFA plans for that eventually, defaulting to billing address if there is no shipping address where the purchaser receives it.” HOW WILL THE BUSINESS SELLING THE ITEM KNOW IF THE SHIPPING ADDRESS IS WHERE THE BUSINESS OWNER WILL RECEIVE THE ITEM? If the “bill to” address is DIFFERENT then the “ship to” address MFA will “eventually default to billing address where the purchaser receives it.” The business with a billing address located in Oregon (a sales tax free state) will now ship the laundry bags to Minnesota tax free. If the “eventual” change to MFA comes to fruition how will the website (ecommerce site) know if the purchaser is the actual recipient in another state?
I am guessing MANY businesses will merely move their purchasing departments (or billing addresses) to a sales tax free or low tax state and order all of their items for other locations in other states this way.
In another tweet exchange worth noting. I think t-w/o-t = taxation without representation:
@EBlankets Even if that wasn’t the case, your example would have t-w/o-r only with gifts. HOS would have t-w/o-r for everything
— Joe Henchman (@jdhenchman) July 15, 2014
@jdhenchman If this is the case then the MFA is just a “little” unconstitutional when it comes to gifts, right?
— Internet Sales Tax (@EBlankets) July 15, 2014
DAVE BRAT Flat Out Opposes the Marketplace Fairness Act
On May 15, 2014, I sent a message to Dave Brat for Congress on Facebook. I asked him what his stance is on the Marketplace Fairness Act (MFA). Here is the response I received from his Facebook Page:
“Thank you very much for your correspondence. Dave Brat is opposed to the Market Place Fairness Act. Dave does not believe that increasing taxes will improve our economy or increase jobs.
Dave Brat believes that our tax system needs to be reformed. Dave believes in simplifying our tax code and reducing the tax burden of individuals and businesses.
I hope this answers your question. If more clarification is needed, I would be more than happy provide a further answer.
We will certainly be following the issue and where Cantor stands on the issue as well.”
Where does CANTOR stand on the Marketplace Fairness Act?
Challenge: ERIC CANTOR come out with a definitive stance on the Marketplace Fairness Act. Your challenger DAVE BRAT is opposed to it. I searched online and I have not been able to find any definitive statements made by you (CANTOR) or your staff on this legislation.
Join me by tweeting and sharing this article and challenge CANTOR to step forward and pledge to NOT to vote for any change on the Internet Sales Tax status. BRAT’s campaign has made a FIRM statement. NOW it is your turn to make a pledge to hold onto “real” traditional Republican conservative values.
I recently read an article on the National Retailer Federation’s (NRF) blog titled, “In their own words: Why retail is the face of Main Street.” The article points out, “When you factor in that 95 percent of all retail companies operate just one location, “small” businesses are unquestionably a big force in the American economy.” The NRF supports the Marketplace Fairness Act (MFA) aka Internet Sales Tax legislation that would require “remote sellers” to collect sales taxes in jurisdictions where they have no physical presence. Please take a moment to read an article I wrote called, National Retail Federation Lies, Smears and Misstatements: Marketplace Fairness Act, that shows that they support the MFA.
Basically the MFA will require companies like mine that only have one physical location(and apparently 95% of all retailers based on the NRF article) to collect sales taxes based on the destination of where an item is being shipped. This will be a HUGE burden on small businesses. We are only located in Minnesota. We are a two person company my wife and I – no other employees). Today if a customer orders from us in another state we do not collect the sales tax on the transaction because our business is only located in Minnesota. The U.S. Constitution currently protects my company from being pursued by another states auditing department and their laws. You have heard the saying, “No taxation without representation.” This is what the MFA wants to get rid of.
Why would the NRF support the MFA when 95% of retailers are small business?
The MFA will allow “other states” auditors and laws to reach across state lines and pursue businesses all across the country. The MFA does have a small seller exemption BUT it will not keep auditors from targeting ANY business that sells anything across state lines. All companies located in one state will have the burden of proving to auditors from another state that they are in fact small sellers and exempt from collecting sales taxes.
Based on NRF’s claim that 95% of all retailers are small businesses with physical presence in one location then the remaining 5% must be BIG BOX stores. BIG BOX stores such as Walmart, Target, Best Buy, etc…want the MFA passed. They have physical presence EVERYWHERE and they already collect taxes EVERYWHERE. I believe NRF “really” represents only the 5% of retailers that are BIG MONEY. They are merely using small business owners as “sheeple” to spread the catch phrases about how the MFA will “level the playing field” for main street. A sheeple is a term used to describe people who voluntarily acquiesce to a suggestion without thought or research. The BIG BOX stores even created a “Main Street Fairness” organization to spread the message to the sheeple about why the MFA needs to become law. Angel Djambazov on Geek Wire wrote “Nobody roots for the bully. Wal-Mart understands this perfectly. (Hence the reason for the Mainstreet Fairness group).” Read my article, Main Street Helps Promote Walmart’s Tax Agenda to Crush Small Business where I show how the “main street” message is being used to promote BIG BOX agenda. BIG BUSINESS is sending out nice messages about how the MFA will save “main street” small business. Then in turn many “main street” sheeple business owners tweet, share and repost the message because they like what they hear, but they never look any deeper. The sheeple then contact their lawmakers and pass the BIG BOX message on and ask for “main street fairness.” What a clever scam big money has created by using small business owners as puppets.
The only retail businesses that will benefit from the MFA are the BIG BUSINESS interests (5%). Wake up small business America (95%) and STOP spreading the propaganda of BIG BOX stores. STOP acting like sheeple. BIG MONEY wants to make the paperwork burden of doing business in America something that only they can handle.
In my opinion, if the NRF “really” represented small business they would be doing everything in their power to STOP the MFA or raise the small seller exemption to a reasonable level. NRF should be HELPING small business owners by educating them about selling online. My company would never join any retailer organization that puts BIG BOX interests in front of 95% of retailers.
Please note anything I write about is my expressed opinion based on what I have been reading in articles or based on my own experiences. I might be wrong. If you think I am wrong feel free to post a response. I will allow arguments on both sides of any article.
The playing field in retail is ALWAYS tilted in favor of BIG money. Last week eBay flew me in for their annual fly-in to Washington DC to meet with several of our lawmakers. eBay is standing up for the small sellers that are the backbone of their business model. During the meetings I heard the term “level the playing field” used to describe the Marketplace Fairness Act (MFA) aka Internet Sales Tax legislation. This made me reflect on how the playing field will ALWAYS be tilted in favor of BIG money.
One of the websites we sell through is ElectricBlanket.NET. Many years ago we wanted to expand our selection of electric throw blankets to a well known national brand of heated blankets. We contacted the manufacturer, completed a dealer application, and obtained dealer pricing on their selection. The throw blanket that we wanted to sell was listed around $32 our cost. After we did a little research we found out that the manufacturer also sold their throw blankets to Walmart. To our surprise you could buy the throw blanket for around $5 less then our dealer price directly from Walmart. I asked the manufacturer if we could sell the same throw blanket that was being offered on Walmart’s website. The manufacturer told us that it was a “special item” for Walmart and we did not have access to that particular product.
Moral of the Story
Big Money often cuts “special deals” with manufacturer’s to control the retail market. Many items that are available to sell by BIG BUSINESS are NOT AVAILABLE for the “little guy” to sell. The “special pricing” offered to BIG BUSINESS is a way to tilt the playing filed and let big money control the market. In many instances the products offered to big and small dealers are identical BUT a different label or packaging is used to differentiate the dealer cost.
The talk of sales taxes as a way to “level the playing filed” is just another way big business wants to tilt the playing field even more in their favor.
I met with U.S. Congressman Joe Heck, Nevada during the 2014 eBay fly-in to discuss the Marketplace Fairness Act (I am on the right in the photo). Thank you Joe Heck for your time. I partnered up with TV superstar Jason Smith of Thrift Hunters a great television show on Spike TV. Watch his show by visiting Spike TV.
— Congressman Joe Heck (@RepJoeHeck) April 30, 2014