As a retailer that does millions in business both on-line and over-the-counter, I want to voice my opinion about the Marketplace Fairness Act. This legislation isn’t about protecting retailers from free-market competition, or running to the government for help. It isn’t about buying discounted products on-line, or the Federal government telling states how to enforce sales tax. It’s about responsibility and an even-handed, nation-wide method of collecting the sales taxes that are due in 45 of the 50 states in the Union.
This is not a new tax. Anytime out-of-state retail, internet and catalog companies decline to collect sales tax at the time of the purchase, those 45 states and the District of Columbia already require the consumer to report it, and pay it when we/they file their state tax return. Those purchases aren’t tax-free under the law and many of consumers dodge these taxes daily.
The importance and fairness of this tax collection issue was so transparently important that both Senate Democrats and Republicans, in a rare show of bipartisanship, agreed to correct it in near-record (69-27) numbers. And let me tell you why it is important to you, me, and our communities too: because a significant portion of sales tax revenue is returned to the point-of-sale jurisdiction. It’s known as the situs rule and has tremendous implications. Situs tax revenue amounts to about 10% of most city income and is one of the major sources for discretionary spending. Most other tax revenue is earmarked for specific functions (schools, roads, etc.).
In short, situs tax revenue adds flexibility and is a prized source of funding for every city in America. In a tough economy, discretionary spending drops, retail suffers, sales tax revenue plummets, philanthropy declines, and the ability of the community and the government to fund both essentials and non-essentials is compromised. Think YMCA, parks, potholes, policemen, libraries, firemen, and all the things that help keep people off the homeless and unemployed lists. It is a fact that Faith and Hope can be bottomless fountains, but Charity and community well-being are dependent on income.
Before you start thinking that this is written by some left-wing whacko, think again. I’m the most fiscally conservative person you’ll ever meet, and I’m one of those businessmen who will be directly affected when this or any similar bill becomes law. I also believe in obeying the law, and paying (only) the taxes I owe to my city, state, and nation.
I change the station when I hear an ad about how some outfit can help a deadbeat get out of paying taxes, because I know that means the rest of us will have to pay more to make it up. Same deal here; if states collect taxes that are already due, they’ll have less need to increase taxes and fees elsewhere.
Contrary to the argument made by eBay and others (who want water down this bill and exempt businesses with less than $10 million in sales or fewer than 50 employees), it’s the little guys who are getting killed by the OOS web and catalog retailers. Testimony to that is the fact that small businesses and local Chambers of Commerce nationwide support this bill with near unanimity.
That is just scare tactics spread by those who oppose the bill. The Senate version of the bill makes it reasonably easy for Internet retailers to comply. States are required to provide free computer software to help retailers calculate sales taxes based on where shoppers live. The same simple software that allows people to figure out shipping costs by ZIP code can calculate these taxes. We put a man on the moon in 1969, more than 45 years ago, and most small businesses now use a POS (Point of Sale) system to keep track of daily sales and inventory and can easily calculate, report and forward those payments with little or no additional effort.
Under MFA, states are also required to establish a single entity to receive Internet sales tax revenue, so retailers don’t have to send collected taxes to individual counties or cities (yet another lie by the lobbyists opposing this bill). And, according to the Senate version of the bill, businesses with less that $1 million dollars of OOS taxable sales are exempt.
I don’t have high regard for either The House or the Senate since they can’t agree on anything other than to hate each other. But both Republicans and Democrats in the US Senate agreed on this bill. That proves this isn’t about parties, it’s about parity. To that end, I encourage every small business owner and caring citizen to call your Congressman or write or e-mail him/her, asking for their support on getting this bill out of committee, onto the floor, and passed into law without modification.
Michael Michalak is the owner of The Fly Shop® in Redding, CA, along with his wife Bertha.