A big new bill sponsered by Bill Delahunt (Rep-D Mass) was introduced on July 1st and is known as the “Main Street Fairness Act.”
Essentially, the bill empowers states to “simplify” their sales tax laws and collect sales tax on every transaction imported into their states. This will affect anyone selling goods or services on the internet.
Does this protect the main street merchant? Does this kill the Internet? Or is this something else?
For those of you not up to speed, currently most states can only collect sales tax from businesses that have a physical presence in the state. Consumers are encouraged to declare purchases made out of state and pay the sales tax directly. Yeah, right.
New York State (among others) recently started collecting sales tax from vendors such as Amazon by claiming that they have a presence in the state through their marketing affiliates (any web sites that link to Amazon web pages for money). It got ugly when Amazon threatened to pull out of any deals it had with local web sites in California. This bill would render all this irrelevant – and every state would be able to charge sales tax for any transaction.
After seeing this bill, Ebay sent out an e-mail (pdf) last night to all sellers asking them to fight this bill.
Putting aside the constitutionality of this bill, it seems pretty obvious to me that it’s the right thing to do. I support main street and its brick and mortar small businesses that are at a competitive disadvantage because they must charge sales tax. I don’t know for sure, but I highly doubt Amazon’s sales in NY State took much of a hit after the state started charging tax.
On the other hand, I can’t help feeling that this is really a foot-in-the-door for the VAT (value added tax). If all states are encouraged to collect sales tax in the same way, the next step is standardizing the rate. Hello VAT!
{ 2 comments… read them below or add one }
Good posting
I think it is important to note that no one likes sales taxes & maybe they should be abolished. But as long as there are sales taxes they should at least be applied fairly. There is no reason that an internet merchant should hold this advantage over someone who has investing in brick & mortar.
I am with a company, FedTax, that provides sales tax services to online merchants entirely free of charge. We do this under the Streamlined States Agreement. And we can do the tax calculation for all states that have sales tax.
Considering that we can do sales taxes without charge deflates the argument that sales taxes are too burdensome and complex for small online sellers
Carl S
Carl,
Interesting concept, although there’s not much about your product online.
Thanks for your input, and best of luck.
Rafi