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AuctionBytes Blog
Covering auctions, collectibles and marketplace selling.

AuctionBytes Blog The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Mon June 3 2013 15:14:25

Demystifying the Marketplace Fairness Act

By: Julia Wilkinson
Sponsored Link
The Marketplace Fairness Act of 2013, otherwise known as the "Internet Sales Tax," is still festering in Congress - currently in the House - but with its outcome uncertain, online sellers are still worried about what its passage could mean for them. But there is a new resource out there, salestaxchanges.com, that aims to answer sellers' questions and demystify the whole complicated hydra on the horizon.



I spoke briefly with Rory Rawlings, Founder and Chief Tax Automation Officer of Avalara, the company that put the site together, and learned something. (Avalara's "elevator speech" is "We provide the fastest, easiest, most accurate and affordable way to manage sales tax compliance."). Did you know that under the terms of the Act, software for remote sellers affected by the bill to calculate and file returns for such taxes would be free? Rawlings pointed to the language in the legislation that spells this out (I know; bills don't necessarily make for great beach reading):

"Each Member State...under the Streamlined Sales and Use Tax Agreement" [would have to] "(D) Provide...software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub
paragraph (H)."

It goes on to say that there also must be provided "certification procedures for persons to be approved as certified software providers." So for the remote sellers affected by the bill,  they would qualify for free software from certified entities to enable them to figure the taxes they'd owe per the legislation.

Still confused? Check out the Sales Tax Changes site, which has more resources aimed at sellers and specifically small business people. For example, there is a map of the U.S. states, and you can click four different colored buttons to see which states are "Streamlined (SST), Easy-to-Implement MFA, Hard-to-Implement MFA," or "No Sales Tax States."

There are also white papers and sections that explain tax terms such as "Nexus." ("Nexus: It's all about physical presence. Or is it?"). Part of me is afraid to find out.

But even if the MFA doesn't pass, it can't hurt to educate oneself about these legal and tax matters.

Did you know that under the MFA, the software provided to affected sellers would be free? Are you following the "Internet Sales Tax" (currently in the House), and do you think it will pass, or why not? Post a comment here!



Comments (12) | Permalink
Readers Comments

Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: Steevo This user has validated their user name.
       
Mon Jun 3 17:00:32 2013
It might turn out unconstitutional.  

They are trying to find a way around the responsibility for a seller in California to have to have a tax paying relationship with the State, county, and even city of New York.  

I think it will ultimately turn out they can't do that. But they are all trying since they are dying to get tax revenue to support the bloated government.  
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: xcergy This user has validated their user name.
       Web Site
Tue Jun 4 01:37:16 2013
Yes, I have many questions.

I recognize that Avalara is the industry leader of tax software, but they also charge a fee for their service.  For small sellers, the fee is often more than the tax charged per transaction.  It's all based on volume. If PayPal had Avalara as the processor, the cost would be $.02/transaction.  For the $1M eBay seller, it would be $.20 or more.   Worse is that you can't get a quote until you call them.  Avalara has a great smartphone app, but it only shows base rates for the 13000 tax districts (2013 numbers), but not the exceptions/exclusions of products sold (fur coats v wool coats for example) http://www.avataxrates.com/

Do you actually expect software offered by CA, WA, SC, NY, TN, TX, and 40 other states to play 'nice' with website shopping carts and still work?  I don't think so.

'free' software?

Sellers still need to categorize items to meet item inclusions/exclusions as there is no standard that meets eBay categories nor UPC codes.

Last on the biggie list are those that sell multi channel.

Just how would Avalara, or 'States' (defined in S.743 as all US States, DC, all US territories, and all (565) Sovereign Indian Nations for those that sell on Amazon, eBay, websites, etsy, and other 3P selling sources?  

Amazon now collects tax for any seller that requests that, but sellers are responsible for filing tax on their own.

Again, their are many questions on this issue that remain unanswered.
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: cfrphoto This user has validated their user name.
       Web Site
Tue Jun 4 01:53:11 2013
If an Internet sales tax is to not have extreme negative consequences on smaller sellers, the state where the business is located should collect on behalf of other states. In addition to a single return, each state should be limited to a single flat rate tax at the minimum statewide tax rate. Integrating "free" tax software with every web site or shopping cart will be extremely expensive, especially for owners of custom built web sites. In some cases, the web site owner may no longer be able to find the individual or company that originally implemented the site.  
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: go-figure This user has validated their user name.
       
Tue Jun 4 06:14:12 2013
It doesn't take much thinking to figure out how this one is going to play out. Take your pick:

1) Sure they'll give you the software for free, but using it to file will be an entirely different thing (think Tax Software for doing your taxes). You can even file your federal return for free but they get you on the state tax returns. Sure, maybe you'll be able to file in the state you live in for free (hmm, we can already do that), but all of those other states, they'll be a fee for that.

Option 2): Yes, you can get a poorly made, crappy performing piece of software for nothing, but if you want one that works, cough up the $$$$.

In all of this, I haven't seen or heard one thing that proves to me that all that's going to happen is to make buying from international vendors more attractive since they won't be charging all of these taxes. Ah yes Congress, let's send more business to China! Keep in mind that Congress has to have some stake in this somehow, otherwise why would they give a you-know-what whether or not a state was collecting more in sales tax.
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: Deltamaster This user has validated their user name.
       
Tue Jun 4 08:37:37 2013
Someone else mentioned it and I agree with it... FORCE the states to implement a SINGLE tax rate for remote sellers.  No matter where the buyer is... which county, city or whatever jurisdiction the rate will be the same.  You go from 9000+ different tax rates to just 50.

OR you make the states do their JOB and collect the use tax from their own citizens as they SHOULD be!
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: FREDDY This user has validated their user name.
       
Tue Jun 4 10:43:01 2013
Does this mean you need to get software from each state?? That would still be a disaster, time consuming deal.  I believe this will hurt more than it helps.
Cannot possibly work with shopping carts. Will there be a FVF on the tax? Sure of it with ebay. How will returns work into the picture? Does the software take care of that also?.
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: Wire This user has validated their user name.
       
Tue Jun 4 13:49:08 2013
Well if brick and motor stores really want it to be fair. It should be like what they do. They only pay tax in the state they are in. They dont ask the cusomter where they live to tax them at the customer state tax rate. So if I sell something online, I should only be required to collect the taxes where I am, not the other 50 states.
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
This user has validated their user name. by: Tula
       
Tue Jun 4 15:34:51 2013
@xcergy makes an important point:
"Sellers still need to categorize items to meet item inclusions/exclusions as there is no standard that meets eBay categories nor UPC codes."

This is not a trivial matter. Every item a seller sells will need to be evaluated for taxability in every single jurisdiction because they all have different (and frequently-changing) rules. And what about sales tax "holidays" that many states like to occasionally offer?
How about data privacy? Is there anything to prevent these third parties from selling our sales data?

There's also customer information privacy. States will demand audits, wanting names, addresses and lists of purchases by their citizens. I saw such a request come into Amazon when I worked in their financial group a couple years back. They did not provide this information (they gave them a composite with just the total amounts and no individual info), due to privacy issues, but that won't stop states from demanding it and perhaps getting laws passed requiring online retailers to provide it. The current debacles with the IRS show that their concern for citizen data privacy is suspect, at best, and I don't imagine state revenue departments are any better.
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: comet This user has validated their user name.
       
Wed Jun 5 00:44:49 2013
I heard an interesting "bit" last night on The Tech Guy on TWIT (This Week In Tech) by Leo La Porte about how the FBI--the FBI!!!!!!---has some way to DEMAND any information it wants at any time about anything for any reason--and you are not ALLOWED to KNOW that they have requested--well--lets be honest---DEMANDED -- this of their source.  (Read::  Google; Amazon; your local library;  any other source)

I can't quite remember what this was called but it puts ANY thoughts we might have had about "Security"  and "Privacy"  right in the toilet.  

Now I for one have a HUGE problem about our  PRIVACY.  And the increasing LACK of it.  I feel and I see more and more every day that we have lost OUR privacy--and our RIGHT to privacy--here in the USA due to such constructs as "Homeland security" and other such.

In Europe they have taken extensive steps to PROTECT privacy--including on-line privacy---but not here.  And we may very well be OVER the line where we CAN'T get our privacy BACK.  

This leads to things like::::   Thought crimes.  Now I dunno 'bout you but when I read a work of FIcTION I don't really want to think that the Thought Police could be knocking on the authors door to arrest them for their IMAGINATION.

Writers like Steven King or Jodi Picoult --who write some scary but ultimately FICTIONAL things--could be PROSECUTED for this--because they dared to THINK it up.  

Don't believe me?   Seek out the story of the NYC "Cannibal Cop" who was a cop--but not as far as anyone could PROVE ever a "cannibal".  Now----this guy WAS pretty strange on where he went on the NET AND WHAT HE looked AT.  But---he did NOT as far as has been proven--ACT on any of this info.  So do we now get to be prosecuted because we dare to THINK of this stuff?  What about the kid who gets assigned to do a research paper on--cannibals?  OR child abuse?  AIDS?  Does this make THEM all suspects?

Yes you can take this very far into StrangeLand but--it can and HAS happened.  

Am I paranoid?  You betcha!!!!

Do I go places on the Net that will get me arrested?  Who knows!  What is not a crime today can surely be one tomorrow IF we let these rights be taken away.  And they are being taken---in secret and in the open.  And we sit here and do----what????---- about it.  
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: AngelaTC This user has validated their user name.
       
Wed Jun 5 12:09:44 2013
So a guy selling a software solution is trying to pacify us by telling us that the software has to be free.

First of all, this tax is unconstitutional.  Change the constitution, then we can discuss the merits.


Yes, I did know that the lae requires the software to be provided for free. But there's no requirement that all 50 states supply a single piece of software,  That's what your new friend there is banking on - forcing sellers to buy a solution that will tie all the various solutions together.

And the cheap stuff we buy from China will still be exempt, so sellers in the US will be facing another unfair price hurdle against third world nations.

 
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
This user has validated their user name. by: Basset
       
Thu Jun 6 09:08:09 2013
''It might be unconstitutional'' - When does that stop anyone????.  Privacy - What privacy?


It is indeed scary times - between the FBI, TSA, and IRS - I feel like we in in some futuristic Japanese Anime Series where everyone's life is data driven.


I picture the various Govt. agencies (past & present) at work:

- hovering over a screen reading Verizon phone records of US citizens (NY Times June 5th article), via a court order that prohibits recipient's discussion of its existence - made by a Super Secret Court!

- secretly recording elected officials for ammunition to send to agenda driven magazines & tabloids to release before the next election cycle,

- flipping a coin for ''knives, no knives'' policy for TSA,

- FBI demanding a back door for wiretapping for all software (Washington Post)

- keeping track of which secret email address belongs to who, in order to befuddle  subpoenas.

- Close surveillance of the various press' email & communication records,

- and, IMO, the worst - the IRS' agenda driven minions thinking up questions that they have no business asking. Abusing the seemingly unlimited power they have to ruin people's lives if they are for the ''wrong'' cause. Closing ranks to cover their actions up & keep them buried deep, like a putrid decaying mess. I was around for Watergate, this smells much worse.

And these folks will have our medical information!!! I am FOR medical reform but NOT for confidential information abuse!   If info can be ''leaked'' because of an agenda, it can also be ''leaked'' for the right price. Tabloids could  have a field day - they should be cultivating informants in the IRS.
 

- Interesting times: I'd better close before a certain 3 letter agency asks David & Ina who I am. Of course they probably already have the info!

I also agree other countries will be given a pass on the tax, allowing them an unfair advantage.
Demystifying the Marketplace Fairness Act   Demystifying the Marketplace Fairness Act
by: LadyAnne This user has validated their user name.
       
Thu Jun 6 10:58:53 2013
The marketplace fairness act doesn't confuse me.  There really isn't any fairness in this act.  Reason being is that brick and mortar businesses do not have the same costs to run their businesses that I do. For example, I have shipping costs, fees I pay to eBay and Ruby Lane, fees associated with software used to help with managing shipping costs, etc...etc.  In other words, it all evens out.  As a consumer, I wouldn't shop on the internet, if I could find what I needed at the local brick & mortar stores. So I  usually have to see if I can find the item on eBay.  There is no fairness.  The only thing about this "ACT" is it is just as dysfunctional and the Government Officials that are trying to enact it. These "officials" seem to believe that the internet is an actual place that exists just like the Mom & Pop store down the street.    The internet is cyber space; it's composed of 1 & 0's and can only be accessed via a computer interface.  But that's is a whole different argument... Anyway "Fairness" if I hear that word one more time...I think I'm gonna throw up!  


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