It’s High Time Congress Passed Efairness

Cara Leigh and Sten Wilson Point of View Farm 8.21.2014Many people maintain that if Congress enacts The Marketplace and Internet Tax Fairness Act (MITFA) then buyers will end up paying more taxes to states. They also mistakenly represent that out-of-state retailers would become responsible for paying sales and use tax, and the process of calculations and remittances would overly burden small businesses. All of these statements are misleading, and attempt to guide intended beneficiaries away from the real benefits of MITFA.

Let’s address the second misrepresentation first. Retailers don’t pay sales taxes. Consumers do. Currently brick-and-mortar and a handful of online retailers do need to collect the sales taxes that are due from buyers and remit those monies to the appropriate jurisdictions. In the case of locally made purchases, retailers collect sales and use taxes from consumers at the point-of-sale. These consumers typically live, work, and shop within the same tax jurisdictions. Taxes on out-of-state purchases are not currently being collected and remitted automatically despite States’ rights to charge those taxes.

So, yes, if Congress enacts MITFA, consumers would pay evaded taxes on their out-of-state purchases. However, such a statement only represents a partial truth because most consumers currently evade remitting their tax obligations on out-of-state Internet purchases to a tune of conservatively $23 billion a year, based on a 2009 University of Tennessee Study, and many are numb to the fact they are actually paying higher alternative state taxes and fees enacted over the past decade to counteract their evasive choices. Instead, consumers in an ideal world would simply honor their tax obligations on out-of state purchases allowing current legislation to simply enact a policy shift streamlining sales tax collection and remittance for everyone.

Clearly there are great sums of un-collected sales tax dollars at stake, whether remaining unpaid or ultimately collected by states. But for a moment let’s agree to remove the financial component from the discussion, and proceed assuming that consumers are actually honorably paying all taxes due, ideally eliminating sales and use tax deficits. In this ideal world, consumers dutifully keep track of every one of their out-of-state and online purchases, calculating taxes due, and mailing the required payments when filing their state tax returns, as required by law in most states going as far back as 1930. Really, this is an onerous burden and is rarely undertaken by consumers, even if they are aware of their legal obligation to do so, which many are not.

Likewise, tracking such calculations and remittances are perceived burdensome for out-of-state retailers, as upheld by the Supreme Court in its 1992 decision in Quill Corporation v. North Dakota. Simply put, the Supreme Court determined the systems and procedures available for tracking and processing out-of-state taxes, in 1992, were unequal to the task, and thus collecting taxes from remote buyers posed an undue burden for out-of-state merchants. But, it is important to note that the 1992 ruling focuses on the burden of payment and collection, rather than on the obligation for payment and collection.

However, much has changed in the 22 years since the Quill decision. As in any marketplace, shifting economic conditions, new innovative technologies, and exponentially expanding interstate sales volumes continue increasing the demand for more efficient technologies including sales tax processing. And lo and behold, there are now innovative companies providing numerous technologies to enable businesses of any size to easily calculate, collect, and remit sales taxes due for any jurisdiction in any state in the nation. And what is more, many of those new sales tax-processing technologies—some even free to use–easily integrate with existing shopping carts and checkout platforms eliminating costly enterprise software solutions, and fully automate sales tax processing.

So in our ideal world, those current tax-paying consumers and tax collecting businesses can now rejoice since innovation easily eliminates onerous legacy sales and use tax requirements from their lives. Furthermore, innovative technologies hold the prospect for actually driving down prices since they fully automate sales tax processing, reducing costly legacy administrative burdens for consumers, businesses and states, freeing labor for additional income generating activities, creating innovation and restoring fair competition.

But, previously burdened consumers and businesses, now steadfast supporters, are not the only ones who will benefit. States also get to celebrate since they are now empowered to receive those previously evaded tax dollars that they can use to fund programs and services in continual demand by their constituents’ ballot initiatives. And by collecting tax payments on out-of-state sales, states can reconsider and eliminate tax and fee increases imposed on their residents over the last decade that were created to compensate for the shortfalls of evaded out-of-state sales taxes. In addition, equal distribution of tax burdens will lower individual taxpayers’ burdens.

In other words, in the two decades since the Supreme Court’s Quill decision, the free market can now supply innovative products to meet the demand for the efficient collection and remittance of interstate taxes. The old inefficiencies of the legacy systems are now replaced, bringing us closer to that ideal world.

So now, let’s leave the notion of an ideal world and return to today and the evaded $23 billion. Those missing tax dollars have gone unpaid because the burden behind collecting and remitting them was too high. That is no longer the case as the free market system of supply and demand has met that challenge. Thus, the only obstacle standing between that ideal world and us is the outdated Quill decision. And contrary to any argument, the Supreme Court noted that Congress is free, by an affirmative exercise of its power under the Commerce Clause, to change that rule. It is high time that Congress moves forward immediately by enacting the Marketplace and Internet Tax Fairness Act before the end of 2014.

Sten R. Wilson and his wife own Point of View Farm, a sheep farm in Bangall, NY.

Don’t listen to the naysayers – eFairness momentum picks up in Congress!

US Capitol

While the opposition would have you believe that Congress will let the clock run out on efairness legislation, the latest activity in both the U.S. House of Representatives and Senate demonstrates otherwise.  Champions in both chambers are determined to level the playing field for small businesses in our communities by closing the online sales tax loophole, and they mean to get it done this year.

After the May 2013 Senate passage of the Marketplace Fairness Act (MFA), which secured a solidly bipartisan 69-27 vote, local businesses became more hopeful than ever that Congress would finally pass legislation that would give them a fair chance to compete against their online counterparts.  While House Judiciary Chairman Bob Goodlatte (R-VA) has expressed concerns over the Senate version, he and members of his committee on both sides of the aisle agree that our local businesses are suffering and that Congress must solve the problem.  Fortunately, small community retailers found another efairness champion in Congressman Jason Chaffetz (R-UT), who has been working diligently to draft amendment language that would address the Chairman’s concerns. He joins Congressman Steve Womack (R-AR), the longtime sponsor of MFA in the House, and Congresswomen Jackie Speier (D-CA) and Suzan DelBene (D-WA), who have been actively working with their Republican colleagues on perfecting legislative language.

Activity picks up in the House

On July 15, the House of Representatives passed H.R. 3086, the Permanent Internet Tax Freedom Act (PITFA), which would seek to make a moratorium on Internet access taxes permanent. Right now it’s set to expire in November.  During the June 18 markup of that bill in the House Judiciary Committee, Congressman Chaffetz and several fellow members of the committee spoke up in support of taking action on MFA.  Then, during the July 15 floor debate on the measure, Representatives again called for the House to move forward with efairness legislation. Why is this significant? Because they are voicing the attitude of many legislators who would like to see PITFA and MFA combined into a single bill, agreeing that passage of both measures this year is critical.

Great minds think alike

Meanwhile, also on July 15, a group of bipartisan Senators led by Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN), Heidi Heitkamp (D-ND), Susan Collins (R-ME) and Mark Pryor (D-AR) introduced S. 2609, the Marketplace and Internet Tax Fairness Act (MITFA).  The new legislation combines a re-tooled Marketplace Fairness Act (MFA) and a 10-year extension of the moratorium on Internet access taxes under the Internet Tax Freedom Act. Consideration of MITFA is being fast-tracked under Senate procedural rules and consideration on the Senate floor could begin as early as next week. This legislation will also need approval in the House of Representatives.

While passage of efairness legislation has been a top priority for local retailers and shopping centers for more than a decade, the activity in both chambers is sending a clear message that leveling the playing field for all retailers is a top priority for Congress this year too.

How you can help  

For ideas about how you can help, visit  You can also follow the discussion on Twitter through our handle @efairness.

Marketplace Fairness is a Win for Everyone

Kim & Friend resizedA competitive retail marketplace is good for everybody. Customers get better prices, better selection and better service. Retailers are rewarded for competing and winning their business. For that system to work though, you need to have a level playing field for everyone. That’s what the Marketplace Fairness Act is about. Whether you’re a local small business or a big out-of-state warehouse retailer, the same rules should apply.

Letting the biggest online retailers off the hook for collecting sales taxes makes the marketplace less competitive by driving out small local retailers. And letting big out-of-state retailers avoid collecting state and local taxes also hurts communities like my hometown of Sparks, Nevada.

Local stores have proven that we can compete if given the chance. Not only that, we also create local jobs and support local charities and community events. When someone buys something from a neighborhood brick-and-mortar store, that money goes toward paying local salaries and local utilities. It pays local vendors for their help keeping local stores in business collecting local sales taxes. That money goes on to pay local plumbers, accountants, consultants and other retailers in the area. It’s the money we use to pay for our employees’ healthcare and educate our families, supporting the people in our community who deliver these essential services.

When a customer comes to Bag of Bones, a dog store we founded in Sparks, Nevada in 2004, they find a wide variety of dog food options. Pet owners today enjoy an unprecedented selection of specially formulated dog foods for dogs almost any size, shape and age. That selection can be intimidating to new pet owners. That’s why our store gives customers the benefit of a knowledgeable staff to help them find what they need. And when they shop in-store, they get the added value of supporting their local economy and local public services with each purchase.

Now let’s imagine that same customer decides to visit one of our out-of-state online competitors instead. The customer might find many of the same bagged and canned dog foods, but not the locally-made treats we sell at the register. Having gotten customer service previously from our staff, they already know what they want to buy, but they miss out on the conversation that teaches them something new about pet ownership. Not knowing what they’re missing, the customer adds the dog food to their shopping cart. Many online stores already offer free shipping already, and most are not required to charge sales taxes even though customers still have to pay them.

That customer checks out thinking they got a discount in the amount of the sales tax. But that difference in the sales tax is money that no longer goes to pay for state and local services. And since the online retailer is based out-of-state, that money flies off to New York or California, never to return to Sparks. The customer gets no local reinvestment value from their purchase and now has the added responsibility of calculating and sending their sales tax payment to the state on tax day. All because a large out-of-state retailer didn’t want to install some simple tax collection software or have to compete on a level playing field with local retailers like me.

I would love to see this loophole finally close in 2014. Free markets mean better prices, better service and better selection for consumers. They keep the government from micro-managing the retail marketplace by picking who wins and who loses. And even the biggest internet retailers headquartered all the way across the country will still benefit from our strong local economic growth. It’s a win-win for everybody.

Kim Hunter is the owner of Bag of Bones in Sparks, NV.

Believe in free markets and the rule of law? Then you should support sales tax fairness!

mike_mAs 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.

Important? Yes.

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.

Burdensome? No.

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.

An Internet sales tax rant

Fred ClementsThis piece originally appeared in Bicycle Retailer. It is repurposed here with the author’s permission. Click here to read the original piece.

It is outrageous that the federal government continues to give the middle finger to brick-and-mortar businesses across the country by failing to fix a broken sales tax system.

It’s time for the House of Representatives to take a deep breath, put down the poison darts, and get to work on this issue.

It’s possible that our elected representatives may just be tired and/or stressed out. After all, they have been busy with various tantrums, government shutdowns, bad health care websites and general ill will.

But this does not excuse the fact that brick-and-mortar businesses are being openly discriminated against with bad laws that can only be fixed by the adoption of good ones. This is not a big government versus small government issue. This is about good government versus bad government and the current situation is baaaaaaad.

To be clear, this is not the Internet’s fault. There is nothing wrong with Internet retailing, and if consumers choose to buy from Internet retailers, many also with physical stores, that is their right.

But favoring one form of retailing by allowing it to dodge taxes is an abomination, a vile and horrible disgrace, not only a black eye for the world, but destruction of both eyes, a nose and an arm.

To its credit, the U.S. Senate approved a sales tax reform bill in May. The President has indicated that he would sign reasonable legislation in this area. Now it’s time for the House of Representatives to get off their collective buttocks and make it happen.

Other than this single issue, the free marketplace is mostly working in the bicycle industry as we all adapt to the Internet. Consumers are freely making choices on where and how to buy from the available options. Vendors are more often making deliberate choices on how they want their products to be represented and by whom, and are increasingly realizing the risk to themselves from commoditization. Retailers are making choices regarding the products they choose to carry based on many criteria, including the retail price being offered by Internet competitors.

The bad actor right now is the U.S. government, particularly members of the House. They are responsible for assuring a level playing field for businesses, but are doing the opposite. It is irresponsible to allow this travesty to continue any longer.

In September, the NBDA and other trade associations sent a letter to the House Judiciary Committee urging them to take up the cause. It read in part:

“The problems inherent in the current collection system significantly harm local businesses, fostering an inequity in the marketplace that we believe is not sustainable. A hearing would allow for constructive dialogue that would move us on the path to leveling the playing field for small businesses such as ours.

“As it stands, large, online retailers enjoy a significant and unfair competitive advantage when they sell to consumers and are not required to collect and remit sales tax. This has resulted in an ever-increasing number of consumers eschewing local, small businesses in favor of online retailers to avoid paying the required sales tax. Compounding matters, with the advent of smartphones, some consumers will spend considerable time at their local stores, seeking recommendations for products from knowledgeable store staff, and, then, these customers will purchase the items on their smart phone to avoid the sales tax, often in the bricks-and-mortar store.

“Opponents of sales tax fairness are asserting that it is being advocated by large chain retailers that want, in their words, ‘to crush’ small businesses with burdensome tax regulations. This argument could not be further from the truth. Our coalition of independent associations has been advocating on behalf of sales tax fairness since 1999. Small business owners were the first to feel the effects of this unlevel playing field, but, as e-commerce has grown, it is telling that it now affects retailers of all size.

“In late July, the Roanoke Times published an editorial in strong support of sales tax fairness, noting, “Business leaders in the Roanoke Valley and beyond have been clear and consistent in their support for the Marketplace Fairness Act…. Owners of local businesses noted that they are the victims of government-imposed tax discrimination under the current system. The merchants aren’t seeking an advantage for themselves, just fairer rules. They pointed to a new study that suggests fairer taxes would benefit the economy, generating an estimated 23,600 jobs in Virginia over the next 10 years and 1.5 million nationally.”

The letter was signed by 18 associations and groups representing independent businesses. It’s time for the House to take action.

Fred Clements is the executive director of the National Bicycle Dealers Association.

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