In May of 2013, the Senate passed the Marketplace Fairness Act (MFA) coercing online businesses to collect and forward sales tax to inaccessible states. The bill is now in the hands of the House Judiciary Committee, which is overseen by Representative Bob Goodlatte (R-VA 6th District). Online Stores, Inc. is part of eMainStreet Alliance, which was co-founded by Drex Davis. This alliance is a group of more than 300 online retailers who have united together to help lawmakers understand how detrimental MFA is. A recent letter was sent to the House Judiciary Committee emphasizing the costs of implementation for each organization. At OLS, the estimated cost of compliance will be $360,000 on sales of $30million during the first year.
On the topic of expenses, Gary Shapiro, the Head of the Consumer Electronics Association and supporter of MFA stated that decrypting, gathering, and paying taxes to 10,000 jurisdictions will be “relatively simple.” Online Retailers beg to differ by contrasting that each jurisdiction has its own laws for sales tax to all sorts of goods from food to non-prescription drugs. In addition, within the same zip code different tax rates can apply. Software systems would cost thousands of dollars with expensive updates every time a jurisdiction changes a tax code. Then, each online retailer will have to categorize their products in order to be decipherable by the software, which leaves small business owners to become specialists on every tax law in 46 sales-tax states. This is practically unmanageable.
If the House passes the Marketplace Fairness Act, audits will launch. The MFA bill will increase audits risk by at least 4500%. As many as 46 states are able to audit our business. This is frightening to OLS as well as the other 300+ online retailers. Unfortunately, unlike big retailers like Wal-Mart, small businesses do not have mass accountants and tax attorneys to deal with exorbitant and laborious audits from every state. There are extreme penalties for disobedience to sales tax, including: repossession of personal possessions in order to collect unpaid sales tax owed by our businesses. That means auditors can seize homes and empty personal bank accounts if they conclude that an error has been made. Just ONE mistake could potentially put OLS, as well as other small online businesses, into bankruptcy. Big box retailers see the MFA as a way to put online mom and pop stores out of business – Congress please stand with small businesses and reconsider the MFA bill!
For more information, please view Kevin Hickey’s (CEO of OLS) presentation that was given at the IRCE Convention: IRCE Presentation