What does the Marketplace Fairness Act means to me?





The United States Senate has shown overwhelming support for the Marketplace Fairness Act. As it will likely pass it brings to question how it will affect you. Note that it will still have to go through the House of Representatives. President Obama has provided support for the bill and the Senate will bring it to a vote on May 6th. This is not the first time this bill has been brought to the Senate. In 2011 the bill failed to be passed. If passed it will affect online retailers, brick and mortar retailers, and consumers. For online retailers GigaBitWare will provide FREE programming to bring your online store to compliance. More information will be discussed in various places of this article. Here we will present the impact the Marketplace Fairness Act will have on you.

What is the Marketplace Fairness Act?

The Marketplace Fairness Act is exceptionally simple. It will require consumers (you) to pay sales tax on online purchases. If you would like to read the entire bill you can do so at The LIBRARY of CONGRESS.

The way things are today (without the bill), only online retailers with brick and mortar stores in the state you live in charge sales tax for your online purchases. So if you have a Staples in your state and you order from Staples.com, Staples must collect sales tax. If you don't have a Staples in your state, are not required to collect sales tax. Note that in most states (Florida being one of them) you are still required to pay these taxes. These taxes are known as "Use Tax". It is a commonly overlooked tax, thus consumers are stealing what legally belongs to the state. In Florida you can find more information at the Florida's Sales and Use Tax webpage where it states:

Use tax is due on the use or consumption of taxable goods or services when sales tax was not paid at the time of purchase. For example:

  • If you buy a taxable item in Florida and didn't pay sales tax, you owe use tax.
  • If you buy an item tax-exempt intending to resell it and then use the item in your business or for personal use, you owe use tax.
  • If you buy a taxable item outside Florida and bring or have it delivered into this state and you didn't pay sales tax on the item, you owe use tax.

This bill will require that business themselves collect the tax for your state. If the bill passes as is, smaller retailers that make less than $1 million a year will be exempt (for now).

Online Retailers

As an online retailer, unless you meet the exception you will be required to collect the sales tax for your customers. This requires that you update you software and web sites to reflect this change. Additionally detailed records must be kept so you can properly report and pay these taxes. As stated at the beginning of this article if you are required to comply GigaBitWare will provide the required modifications to your online ecommerce site free of charge. This applies to you if as of April 26th your store is hosted with us and we currently manage it. What we will do is write the required code and set an inactive flag on your software. Once the bill passes (doing so this time around or at a future date), all we will need to do is set the flag to active on the required date. We will make it that simple! To take advantage of this offer just send an email to support@gigabitware.com on or before May 5th and we will schedule you.

Directly the bill will not affect your profit margin as it is not you but the consumer who is paying the tax. Indirectly consumers may look at more options including brick and mortar shops since they will have to pay the taxes anyway. Not to mention any extra man hours it will require you to spend on the extra accounting.

Brick and Mortar Retailer




If you are a brick and mortar retailer this bill will not directly affect the way you do business with your physical retail location. However if you also have an online shop you will have to comply as well. For those brick and mortar shops that just barely miss the exception this may be a large expense cutting into your profits. Be sure to take us up on our offer to provide this service for free.

This bill is meant to help brick and mortar retailers. The bills intent (so they say) is to prevent big online retailers from having an advantage over the small local business. Bill Hughes, senior vice president for government affairs had this to say:


... is proof that the special treatment of big online businesses at the expense of retailers on Main Street will soon be a thing of the past. The overwhelmingly bipartisan support for leveling the playing field is rare in today's political environment and paves the way for a level playing field once and for all.

For too long the Main Street retailers that are an integral part of their communities have faced tax rules that put them at a disadvantage to their out of state, online-only competitors. The Marketplace Fairness Act would simply provide states with the power, if they choose to use it, to ensure that the market, not government, determines winners and losers. We applaud the Senate for its support, thank the sponsors for their steadfast commitment to fairness, and look forward to final passage and working with the House to level the playing field for all merchants this year.

So in theory this should help your local sales. Only time will tell how it truly affects you.

Consumers

All this means for you is higher prices! The mindset that the lack of taxes makes products online cheaper may not be the case. If making an $800.00 purchase and having to pay over $50.00 tax on top of the shipping charges it may be worth checking out some local shops as well.

So no matter what boat you are in this bill will affect you in some way. Only time will tell how much affect it will have on business and how we shop.