The Marketplace Fairness Act has received great interest lately including a lot of negative commentary–and rightly so. A central tenet of all taxation issues is that any taxes levied must be uniform across the board. The Marketplace Fairness Act, and many other proposals to formalize collection of sales tax on Internet sales, fails this important clause at this time.
In response, the House of Representatives Judiciary Committee outlined seven principles that must be met in order for a successful solution to Internet sales tax to be found.
All seven are important, but Tech Neutrality is key to ensuring compliance, and to addressing the fears of all e-commerce sellers.
The main premise of Tech Neutrality is that tax collection should be equivalent for “Brick & Mortar”, “Exclusively Online” and “Brick & Click” businesses. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses.
Under current regulations and proposed regulations under the Marketplace Fairness Act, this concept does not exist. When an individual purchases an item from a Brick & Mortar store, there are no questions surrounding where the purchaser hails from in order to collect the appropriate amount of tax. The local rate is collected on that purchase and all other purchases made in that location. Internet retailers do not get that luxury. They must know not only where the purchaser is located, but also a plethora of other diminutive details before calculating what amount of tax to collect.
Chances are you didn’t get into business to deal with taxes. And it would be nice to make taxes an afterthought. Sales tax will always need to be taken into consideration. For this reason, it is important to understand how these proposals could affect your business if they were to be approved. It is exciting to know that the ecommerce business is being taken into consideration and that there are proposals outside of the Marketplace Fairness Act that make Net Neutrality the focus. Stay tuned for future blog posts reviewing these proposals, along with how they would affect your ecommerce business.