Guest Post by Kyle Sanford]
Consumers in the 45 U.S. states that levy a sales tax may find themselves putting a bit more on their American Express cards when they start their holiday shopping this fall. The Marketplace Fairness Act (MFA), which would create an Internet sales tax, was overwhelmingly passed by the Senate on May 6. If the bill gets through the House of Representatives and land on President Obama’s desk, it would become law just in time for the holidays.
Marketplace Fairness Act (MFA)
Impact on Businesses
Small and medium-sized businesses will be the ones most impacted by this. They will have to implement new software and procedures into their online shopping carts. Since the MFA only targets businesses that do more than $1 million in annual out-of-state sales, it isn’t likely to affect the smallest companies that are run by families and entrepreneurs. Many brick-and-mortar-only businesses are in support of this bill since it will help to even the playing field with online retailers. The bill is also meant to curtail “showrooming,” the practice in which customers go to a store to physically look at an item, then buy it online for a cheaper price.
Most corporations will be unaffected since they already have physical locations in most states. Paul Misener, the VP of global public policy at Amazon, told Wolters Kluwer Law & Business he supports MFA because most state taxes are unconstitutional per the 1992 Supreme Court ruling in Quill v. North Dakota. The decision outlawed “use taxes,” which North Dakota tried to impose on Quill Corporation, even though it had no physical presence in the state.
Impact on Consumers
Current legislation in many states requires consumers to pay taxes on online purchases when they file their tax returns at the end of the year. PC World estimates that 90 percent of consumers are not aware of the laws, or just simply ignore current regulations. Thus proponents of MFA say the bill isn’t a new tax, but a way of enforcing an existing one. The MFA will lessen the price advantages for online retailers, especially when shipping and handling is factored in.
The MFA still has a ways to go before being enacted. CNN estimates that the earliest it could go into effect is October 2013. If the bill becomes law, states will be required to create and distribute software to companies who are impacted in order for the collection process to go smoothly.
It’s not too late for business owners and consumers to contact their Congressman and voice their opinions.
As a financial advisor and business writer, Kyle shares finance news and strategies that help small businesses improve operations.