How Can a Small Business Cope with 45 State Audits? They Can't
The Marketplace Fairness Act remains a highly flawed piece of legislation whose warts are showing and growing. Things are only going to get worse. The Marketplace Fairness Act (MFA) in terms of audits, software integration costs, and compliance will drastically affect small businesses. Online sellers are usually determined as the target of this legislation, but it affects all remote sales, catalogues, manufacturers, wholesalers, and distributors. The ramifications are astounding.
“I truly cannot see how our business could possibly handle audits by scores of different states and tax jurisdictions at any one time,” says Rick Smith of Chefsource.com in his Wall Street Journal opinion piece.
As Smith says, “Physical location is the key, and any attempt by other states to pass their tax-collection burden on to me is a grave threat to my business.” Physical location has been working. States don’t want to pursue the means of collection already on the books because they know it would be more than unpopular, and they want to extend their tax laws and regulations across their borders to people who cannot vote.
Not only do people like Smith have concerns on what is in the bill, they also are concerned by what is not addressed in the bill. Smith asks, "how would this new remote auditing power be enforced? Will they come to my office like my local auditor does? Of course not. Will we be compelled to attend audits in different states? This is not addressed in the bill or directly addressed in the states' simplification standards document."
"The myth of free software solving everything is especially infuriating to business owners who understand the business processes involved....Every state is allowed to offer its own choice of software. The software might be custom-written by the state, or might be licensed from a tax-software provider. It's not possible to integrate numerous, incompatible "free" solutions into our business. The only solution is to pay a provider."
Instead of helping small business and retailers across the country, all the Marketplace Fairness Act does is increase their burden with new complicated regulations. It is yet another solution in search of a problem.