Archives For Marketplace Fairness Act

According to the Association of American Publishers and the Book Industry Study Group, e-book sales rose 44% to $3.04 billion in 2012. Similarly, digital music sales were up 9.1%, with digital transactions making up a record 37% of all album purchases, according to Nielsen.

As seen in the statistics above, digital transactions are on the rise; and in turn, that $10.99 e-book or $1.29 iTunes song may be more expensive than you think. With Minnesota’s recent provision in its state tax bill, it’s residents will be the latest consumers facing taxes on digital products.

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The non-partisan United States Conference of Mayors reported on Friday that cities and counties across the country would be losing out on $1.7 billion in new revenue this year because Congress has yet to pass the bill that allows states to tax Internet sales.

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MFA Votes

The U.S. Senate voted overwhelmingly on Monday to approve a measure allowing states to collect sales tax from online purchases.  In a vote that split party lines, the Marketplace Fairness Act (MFA) passed by a margin of 69-27 (See vote breakdown on right).

Despite its ease of passage through the Senate, the bill faces an uphill battle in the Republican-controlled House.

“We place a 30 percent probability that the bill is signed into law by the end of the year” primarily due to opposition in the House, said Guggenheim Securities analyst Chris Krueger, “Our odds will increase following passage of this bill in the Senate provided it receives a big vote of support,” he said (Reuters).

The bill received support from prominent Republicans such as U.S. Senators John McCain (Ariz.), Lindsay Graham (N.C.) and Saxby Chambliss (Ga.), but may be less favorable with House Republicans who have been reluctant to attach their names to anything that hints of a tax increase.

“Call me a conservative, but I believe the right approach to tax fairness is to reduce rates – not force higher rates onto others,” said Tom Graves, a House Republican from Georgia (Reuters).

Anti-tax activist Grover Norquist tweeted that the MFA represents a “struggle against new and higher taxes.”  His sentiment is shared by lawmakers from states with no sales tax (Alaska, Delaware  Montana, New Hampshire, Oregon), and online merchants such as eBay Inc, and Overstock.com Inc.

The bill’s co-sponsors are Illinois Sen. Dick Durbin (D), Wyoming Sen. Mike Enzi (R) and Tennessee Sen. Lamar Alexander (R).  Corporate backers include Best Buy Co Inc, Wal-Mart and Amazon.com Inc.  The bi-partisan National Governors Association  also strongly supports the MFA:

“Marketplace fairness is about collecting taxes that are already owed on retail sales—it is not a new tax nor a tax on the Internet. Annually, states fail to collect more than $23 billion from taxable transactions conducted over the Internet or through catalogues. This legislation levels the playing field between Main Street and e-street. It means fair competition for consumers, helps states collect what is owed and does not cost the federal government a dime” (National Governors Association statement released 02/14/2013)

One of the biggest hurdles to passing the MFA is its perception as hurting small businesses.  EBay Inc Chief Executive John Donahoe said the legislation unfairly burdens small online merchants; in an unprecedented lobbying effort, he sent an e-mail to over 40 million eBay sellers urging them to oppose the MFA.

Most eBay sellers won’t be effected by the legislation though, since the MFA exempts businesses with annual out-of-state sales of $1 million or less. Rex Solomon, owner of a Houston jewelry store that uses eBay, told cpapracticeadviser.com that “eBay is working to preserve special treatment for a handful of multi-million dollar sellers that puts my business at risk.”

Donahoe, for his part, is pushing to raise the ceiling to $10 million.

The MFA will be reviewed by the House Judiciary Committee, where it will undergo hearings. “Judiciary Committee Chairman Robert Goodlatte, a Republican, has reservations about the legislation, including its complexity and potential impact on small businesses, a spokeswoman said,”(Reuters).

Interestingly, the MFA mandates something that both parties support – tax simplification.  If implemented, states could only begin collecting sales tax from online merchants only if they simplify their tax code.  As instructed in the MFA, the tax simplicity requirement can be met either by adopting the Streamlined Sales and Use Tax Agreement, or by meeting a list 5 simplification measures described in the bill.

24 states have already simplified their sales tax laws to make it easier for multistate retailers, according to Tax Cloud, a sales tax service for online retailers.

The MFA is independent from Congress’ effort for broader tax overhaul.    Continue Reading…

A measure to extend state sales tax to all online purchases is getting the attention of some major lobbyists.  With a Senate vote on the Marketplace Fairness Act (MFA) expected as early as tomorrow, stakeholders are making their voices heard.

In one corner, there’s the forces of major retail like Best Buy, Wal-Mart, and the online giant – Amazon.com. They’re joined by the bipartisan National Governors Association and smaller retail owners in the years-long fight to require state sales tax be applied to all internet purchases.

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The MFA has its big-gun supporters, but they’ve got powerful competition from the likes of eBay, Overstock.com and most recently, Wall Street; the Securities Industries and Financial Markets Association (SIFMA), which represents hundreds of companies including Goldman, Sachs & Co., Morgan Stanley, and E*TRADE Financial Corp, recently came out in opposition to the bill in fear of it leading to a financial transactions tax on bonds, stocks and derivatives. Continue Reading…

Its closing time, online shoppers. Your days of tax-free purchases could soon be over, so order your whiskey and flat screen television fast. Late last week, by a 75-to-24 vote, the Senate made clear its support for a national sales tax on a variety of internet purchases.

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While the Marketplace Fairness Act waits its next trial to pass congress, many states are attempting to pass their own version of the law, which the attached infographic appropriately dubs, “The Amazon Tax Law.” Check it out below to see if your state is in the mix; either way, we recommend enjoying your online shopping tax free while you still can!

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Since the dawn of the internet users have enjoyed shopping, for the most part, tax-free. A 1992 Supreme Court Ruling said that states could not collect sales tax from businesses that do not have a physical presence in that state. As such, online retailers have enjoyed a competitive advantage over most local retailers, except in the 4 states (DE, NH, OR, MT) without a sales tax. For example, if a California resident wanted to buy a stereo that cost $100, they could head to their local electronics store and pick one up for a total charge of around $110, factoring in state and local sales taxes. Or, they could search the web for deals, likely find the stereo for a cheaper or discounted price, and purchase it without any sales tax added. Even if they did not find a better deal, they’d still save nearly 10% on their purchase by buying online. Shipping costs might makeup for this difference, but nowadays most online retailers offer free shippping deals for members or for orders over a certain amount. As such, consumers are switching to online shopping as their preferred method of retail purchasing, hurting local stores and state revenues. In California alone, the state loses nearly $1 billion each year from uncollected sales tax on internet purchases. Nationally, the trend has been spiraling upward for years. According to the US Census Bureau, over 76% of American households own a computer, and Americans enjoy nearly universal internet access. Given the above, it’s no wonder that e-commerce sales have nearly quadrupled in the last decade (see infographic below).

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