It is really no surprise that congress is finally taking up the issue of applying sales taxes to e-commerce sales. Honestly, many people are surprised it has taken them this long. If the house passes the “Marketplace Fairness Act” which they are expected to vote on within the next few weeks there will be some significant changes to how Internet Marketers do business. The bill is meant to give a fair market to both online retailers and those in the traditional brick and mortar stores.
As the bill is currently worded it would require all remote sellers (aka online marketers) with gross receipts over $1 Million to collect sales tax in qualifying states. This applies to states whether or not they have a physical presence within the borders of the state.
There are two main concerns for marketers regarding this bill. The first, and most obvious, is whether they will end up having to pay taxes, and if so how much. Many retailers thing that gross receipts over $1 Million sounds like a lot, but depending on how the bill is implemented it may not go down to the individual marketer. ClickBank as a whole, for example, has far more than $1 Million. If the state or federal governments attempt to put the tax at that level the costs will trickle down to the individual marketers in one way or another.
In addition to the actual costs of any potential new tax there is the worry about how it will be implemented. If the bill passes there will be adjustments that need to be made, and while within a year or two all the bugs will be worked out, the transition period may be quite difficult for some businesses.
There are supporters and opponents of this bill throughout the e-commerce world making this an even more complex issue. Amazon.com, the world’s largest online retailer, for example has recently said that they will already have physical locations in over half the states so they will already have to pay sales tax in them. Having to collect additional taxes from other states is not a significant burden to them and they are supportive of the bill.
NetChoice, a trade association for ecommerce companies including overstock.com and eBay recently came out against the bill. They believe the new taxes will slow down the growth of ecommerce which has been such a huge benefit to the US and Global economies in the past several years.
One thing I think we can all be sure of, however, is that companies in the world of ecommerce have always been extremely resilient and flexible. If this bill passes it may cause some problems and even some businesses to have to close shop, but others will come in and fill the gap as they always have. Personally I am against the bill, but I do expect it to pass and I’ll plan my future accordingly.
What do you think? Would you be hit by any of the new taxes from this bill? Do you support this bill? This is definitely one everyone should be keeping a close eye on to see if it passes, and if it does what the long term impact will be to online marketers everywhere.
