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The Market Place Fairness Act

06/30/2015

The United States Legislature is revisiting the so called Market Place Fairness Act. There are proponents on both sides of this contentious issue. The  Market Place Fairness Act  would allow States (and other localities) to collect sales tax on Internet sales even when the business selling the product has no presence in the State the purchaser resides in. Currently, an online business only has to pay sales tax in States where it has either a physical presence like an office or staff like a sales representative (the rules are more complicated in many cases and are often based on the concept of a nexus between the business and a locale ). The Market Place Fairness Act would allow States and other locales to cross the sovereign borders of a  state and assess a sales tax on a sale that takes place in another State.

It is claimed that this act will even the playing field between brick and mortar businesses and online businesses like Amazon and others. The idea is that if a brick and mortar business has to pay sales tax and an online store does not it makes it difficult for a brick and mortar store to compete with the online store prices. On it's face this makes sense and of course we all want to be fair but there are several issues that are seldom if ever mentioned when this act is discussed.

If the goal is to be fair to both types of businesses then how will we address the fact that under this act an online seller may have to deal with as many as 9,600 different sales tax locales? The paper work, accounting fees and resources necessary to implement and remit taxes to multiple locales would be over whelming if not impossible. A bricks and mortar business (under current rules or if the act is implemented) would never have to deal with any where near this number of potential taxing authorities. This hardly seems like fairness is what the act is striving for.

I believe the elephant in the room is the fact that the act establishes the ability for States (and other locales) to require businesses to pay sales taxes to entities that do not offer the business any representation. I believe there was a revolution waged against taxation without representation and it was fought by the very same Country that now wants to impose an opportunity for this to take place again. It wasn't right 240 years ago and it isn't right now.

Another issue that plagues the Act is the possible privacy ramifications of States trying to monitor and track out of state sales. Would this require multiple State databases storing sales transactions from around the country? How will reporting be done? Will each locale have the ability to audit or demand access to business records? Who will be in charge of securing all of this information, the NSA?  I could go on and on but I think you can see my point.

These points barely scratch the surface of the issues that online businesses may face if this Act is passed.  I think it is highly unlikely that "Market Place Fairness" is the true reason this Act has been proposed given the problems it would inflict on online sellers. Regardless of the origin it appears that  Market Place Fairness Act supporters have ignored what the word fairness actually means. The word Fairness; "to be free from bias or injustice" simply doesn't suggest that possibly massive new compliance and regulatory hurdles would be "fair" for online sellers.

Like most modern political actions it is important to pull back the curtain and see what the real agenda is. The Act would rely on the power of the Federal Government to control interstate commerce. The interstate commerce clause is rife with constitutional questions which we won't get in to here. The larger question is what will happen when multiple States and Localities step in to tax a single sale, or when the process of complying with multiple jurisdictions sales tax  rules become over whelming for businesses? Will the businesses simply have to shut down or will Big Brother (The Federal Government) step in to save the day and administer a new national sales tax system?




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Tags:   Market Place Fairness Act | United States Legislature | contentious issue | sovereign borders | sales tax | online businesses  

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