Small Businesses Identify Serious Problems with Internet Sales Tax Legislation
Small online businesses launched a major effort today to combat misleading claims from those in favor of the Marketplace Fairness Act. The eMainStreet Alliance announced that they are collecting signatures for their letter to the House Judiciary Committee opposing MFA.
These small online business believe that true Main Street physical retailers and true Main Street Internet retailers are not at odds, but, in fact, allies. eMainStreet makes the point that “in 2012, big-box retailers accounted for more than 83 percent of online sales. Their online market-share is increasing, and by way of the MFA the growth of their retail oligopoly will accelerate.” This is precisely what happened in the physical retail space.
Here are some paraphrased take-always from the eMainStreet letter:
- Audit risks for small online retailers will increase by 4,500%. Not only are there 45 new state audit authorities, but they also comprise a relatively small pool of targets for this type of audit, so proportionally their likelihood of being audited multiple times increases.
- As online businesses grow they will expand and create nexus in other states, begin to use state services, and voluntarily collect sales tax in those states, while benefitting from actual representation and due process.
- “Showrooming” where a customer will visit a store to test a product works both ways – it affects online and physical retailers. A January 2013 report from PwC shows that only 2% of the 10,000 consumers surveyed research products in-store and then shop online. However, 23% did the opposite and went online to research before buying in-store.
- There is a significant compliance-driven financial burden associated with “free software.” In the first year of the law, the integration, compliance and remittance costs for business ranges from $20,000 to $300,000. Many eMainStreet members above the $1M threshold estimate that compliance costs will exceed their entire profits for the year. Forcing layoffs and, in some instances, business closures.
- Marketplace Fairness could cost approximately 220,000 jobs.