Legal Matters: Proposed Marketplace Fairness Act Threatens Direct Marketers
In addition, this newest effort to expand state tax authority differs in substance from prior bills. Whereas most of the previous bills would have benefited only those states that adopted legislation conforming their tax codes to the so-called Streamlined Sales and Use Tax Agreement, the current legislative proposal has no such limitation. Consequently, if the bill passes it would force any retailer with more than $500,000 of annual sales nationwide to collect sales taxes in more than 8,000 state and local tax jurisdictions.
The Marketplace Fairness Act does nothing to standardize the tax systems and expenses among the various states for small and midsized retailers.
Showdown is Inevitable
Large shopping center retailers don’t even try to make the claim that the Marketplace Fairness Act would lessen the burden of tax collection. Instead, their primary argument is that all sellers should bear the burden equally as a matter of fairness. However, the argument that current nexus standards result in an “uneven playing field” is based on a false premise. Bigger retailers receive numerous state and local tax benefits and other incentives to locate stores in states and communities. These include rebates of property tax, subsidies for utility lines, tax deductions for new hires, etc. On the other hand, remote sellers receive none of these government benefits. Yet they’d be burdened with collection of the tax to fund such government subsidies.
The battle lines are being tightly drawn. While national retail chains and even Amazon favor the Marketplace Fairness Act, many small online retailers believe that such legislation would cripple their businesses. They argue that the internet is an incubator for startup companies and enables small businesses access to a national market for their goods and services. Small and midsized cross-channel retailers maintain that a new federal law, effectively reversing Supreme Court precedent and expanding state taxation authority over internet transactions, will harm e-commerce, which is vital to the nation’s economic recovery.