The Marketplace Fairness Act is a proposed piece of legislation recently being considered by Congress that has the heads of many spinning in confusion. In today’s blog post, we introduce the basic details of the Marketplace Fairness Act and how it could affect you and your business if ultimately enacted.
3 Marketplace Fairness Act Questions:
1. What is it? The Marketplace Fairness Act is proposed legislation being considered by the US Congress that would allow individual states to encourage the collection of sales tax from remote vendors. Remote vendors include large online and catalog focused sellers like Amazon and Ebay, as well as smaller “Mom & Pop” internet retailers., which is the reason the proposed Act is controversial. It’s difficult to find a “one size fits all” solution.
2. How does it affect me? As a consumer, the Marketplace Fairness Act will affect you if the online retailers you currently purchase from begin collecting sales tax. (Note that technically, you should already be remitting use tax – but that’s the topic of a future blog!) . However, if the Act (or some version of it) is not passed , the lack of sales tax collection by remote vendors can be a disadvantage for local vendors and businesses, and of course, states. According to MarketplaceFairness.org, “Consumers are required under existing state laws to pay sales and use taxes on the goods they purchase, but online sellers simply are not required to collect the tax in the same way that local businesses do – which puts local businesses at a disadvantage.”
3. Why should I care? Did you know that states typically estimate 20% of their revenue to sales and use taxes? As it stands now (before passage of the Marketplace Fairness Act of 2013), states can only enforce sales and use tax laws in their own state, and companies can only collect sales and use tax in the geographic areas in which they have a physical presence. Supporters maintain that the Marketplace Fairness Act will allow for billions of dollars in revenue to be collected that was otherwise uncollectable in previous years.
While these are simple basics of the Marketplace Fairness Act, we will continue delving deeper into the details throughout the month and analyzing more of the potential pros and cons of the Act. Be sure to check back in two weeks to learn more about the Act’s various provisions.
Labhart Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, credits and incentives maximization, income tax and sales/use tax planning and other special projects. We also specialize in maximizing the California enterprise zone program tax credits for clients. To learn more, contact us today at www.LabhartMiles.com
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