Tuesday, April 23, 2013
The Marketplace Fairness Act
I don't do "political" very often - it has to be something I feel very strongly about so when I spent 5 house researching this (without even dipping into my chocolate supply!), I knew I had to write about it. This morning, after reading that the Senate had voted to bring the Marketplace Fairness Act to the floor for debate, I spent a good amount of time researching it. The idea of the act, if passed, is that online retailers will need to collect and remit Sales and Use Tax to municipalities that they do not have a significant nexus or physical presence (the hallmarks of due process) thus affecting interstate commerce. In VA, like many other states, when you make out of state purchases via mail order (phone, catalog, or internet) or in person where you did not pay sales tax where your purchase cumulatively totals more than $100 per year (not per purchase), you should be paying Use Tax (it's the "other half" of the 1966 Virginia Assembly Sales and Use Tax Act). It's not a well enforced tax and would be a significant revenue source for states if passed. Currently, it is the duty of the consumer/resident to report and pay these taxes but the MFA is seeking to change the burden of filing and remitting Use Tax from the consumer to businesses. The Supreme Court has held for almost 60 years (most notably Miller Bro.s v. Maryland and National Bellas Hess v. Illinois and more recently in Quill Corp v. North Dakota) that if states and municipalities were allowed to impose tax burdens on out of state businesses, "the resulting impediments upon the free conduct of its interstate business would be neither imaginary nor remote".
Miller Brothers established that there was no due process definite link in delivery of items purchased across state lines.
National Bellas Hess established the same with products sent via mail or common courier.
Quills Corp was actually interesting in that it addressed semi-online catalogs (floppy disks with software that could check the out of state warehouse inventory and place orders - precursor to internet sales) which thus established that having the software or disk did not constitute a presence in the state.
All reflect on the Commerce Clause of the US Constitution combined with the Import/Export Clause and find the same - that states may not impose tax or duties on out of state businesses - but the work-around of this proposed act is that Congress will be regulating this commerce, not the states. I'm not sure how Congress regulating this type of commerce will be less impeding...
Previous attempts to pass similar laws have been rejected due to complicated tax codes. The difference this time is that software could be created to do the legwork (there are programs out there that currently have this functionality) but who would take the blame and pay the penalty when it is incorrectly calculated? The MFA lists both software vendor and merchant are liable.
My proposition being sent to my senators and congressmen is to educate consumers on their duty to pay this tax on their own purchases rather than to make me, as a business owner, become a sales tax expert in literally thousands of tax jurisdictions.
Please take time to write to your Representatives to share your feelings about this Act. And remember to file your own Use Tax to show that this act is not needed!
Info on the Marketplace Fairness Act:
Contact your Senators:
Contact your Congressman:
Virginia Use Tax Form (also can be paid on your personal income tax form 760): http://www.tax.virginia.gov/taxforms/Individual/Income%20Tax/2010/CU-7%20and%20Instructions.pdf