The Remote Transaction Parity Act and Chinese Influence

Written by Paul Bondsfield

Here we go again- another piece of legislation aimed at “leveling the playing field” between online sellers and brick and mortar retailers.

H.R. 2775 was recently introduced as the Remote Transaction Parity Act. A competing bill with the Marketplace Fairness Act of 2015(not to be confused with the Marketplace Fairness Act of 2013), it is designed to allow states to collect sales tax from remote sellers, namely those selling online who do not already collect them. This, to the States, is easier than enforcing their own use tax laws.

There are so many things wrong with this bill- the fact that it’s been pushed by the big retail lobby, that those lobbyists masquerade as small business, that sponsor Jason Chaffetz(R-Utah) has a former staffer working at a company that stands to gain tremendously, and of course that it doesn’t address the burden of compliance. The Competitive Enterprise Institute notes that state auditors will use a loophole to audit sellers whenever they want. (https://cei.org/content/cei-responds-remote-transactions-parity-act)

But forget all of that. What’s missing is banter about the world market we live in, and what out of country sellers will do to the small American business if this goes through.

Competition isn’t a bad thing. It doesn’t matter that China is now producing goods, private labeling them and slapping them down in every marketplace like Amazon, Ebay, and Rakuten. Right now you can go to Alibaba Express, buy in English, and have your goods delivered quickly, and for a fraction of the US price. I’ve done it myself. We grow, we adapt, we compete. That’s the strength of the American entrepreneur. I’m not afraid of China necessarily- or any other out of country seller.

But here’s the rub. If remote sellers have to comply with Chaffetz’s legislation, the out-of-country sellers win. For starters, they won’t have compliance costs. We will. We WILL need to hire accountants and bookkeepers, full time, or at least hire an outside agency. This is what the big box stores bank on. The Chinese? Nope. They don’t have to comply.

Secondly, the squawking about “not fair” will now apply to ALL US businesses. So the law, in effect, will give the Chinese the advantage that the big box lobbyists claim that we have. They won’t have to collect sales tax. In Alabama, that purchase could be close to 10% cheaper, depending on your district.

Another issue pertains to small purchases. 5 or 6 percent is no big deal on a $10 item, right? Well, it turns out the US Postal Service has a special trade agreement with China that allows them to ship small packages to us for very little. We’re talking less than it takes to ship across our country right now. This is a big one, and good luck getting Congress to take up the issue.

Finally, there is the customs issue. I recently purchased a $5000 item directly from China. I pushed the seller on the issue of duties and taxes, and how and how much I might pay. Their response was to let me know that they would mark a much lower value of $1500 on the package, and I wouldn’t have to pay at all. If you visit AliExpress or any number of Chinese English language sites, you will see there that you can purchase everything from electronics to shoes, and the seller offers to knowingly evade US Customs by marking the item as a gift. The Feds lose their tariff base, the state gets nothing anyways, and the Chinese seller wins.

The RTPA will allow foreign sellers to really notch up their US presence. By evading taxes, enjoying reduced shipping on our dime, and by putting up a tax wall, we all lose. But lets see this Act for what it really is- a big-box induced lobby aimed squarely at small US retailers so that they can do what they already did on Main St- crush the competition.

written by Paul Bondsfield

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