Marketplace Fairness Act May Reach Many More Smaller Businesses
By David A. Utter
The idea behind the Marketplace Fairness Act may seem entirely reasonable at face value. Consumers in states that charge a sales tax when buying goods locally will have to pay that same rate when they shop online, regardless of the physical location of the internet seller.
Consumers have long been required to pay such sales taxes anyway, if they haven't been collected by the seller. The proposed law, which passed the U.S. Senate, make the collection of these taxes a mandated activity for ecommerce businesses.
However, the reach of the Act may be greater than perceived. Steven Power, CRO for Bigcommerce, said in a blog post at The Hill that the level of sales needed to require collecting and filing these taxes will hit a lot more businesses than one realizes.
Power noted the bill will require only companies with $1 million or more in sales to out of state customers to collect these taxes. However, it appears some linguistic legerdemain is in play when it comes to determining that million-dollar threshold.
"It's all about the Gross Merchandise Value (GMV), a financial term used in online retail to calculate revenue sold through a marketplace, which includes fees paid to that marketplace," said Power. "While an online retailer may have a GMV over $1M, their profit is usually much less - putting them at a severe disadvantage." He believes this limit is too low and "will stunt small business growth," and suggests the revenue figure be raised to at least $20 million, if not higher.
That $20 million figure is definitely much less than one major ecommerce player (and MFA opponent) expects to handle in the coming years. eBay announced in March 2013 they expect to have a Gross Merchandise Value of $110 billion in 2015, up from 2012's figure of $75 billion.
According to Power, the issue isn't whether the 6-8 percent increase in the total sale will deter buyers. After soliciting opinions from the merchants who use its platform (which numbers 35,000), he said their concern is "the administrative nightmare of sorting through state and local tax rates."
Not everyone agrees with that assessment, according to a recent EcommerceBytes article, with industry players deeply divided over the issue.
About the author:
David A. Utter is a freelance writer based in Lexington, KY. He has covered technology topics from search to security to online business and has been quoted in places like ZDNet and BusinessWeek. He considers his appearance on NPR's "All Things Considered" with long-time host Robert Siegel a delightful highlight. Send your tips to firstname.lastname@example.org and find him on Twitter @davidautter and on LinkedIn.
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