Proponents of the Marketplace Fairness Act (so named because it purports to make all retail sales “fair”) believe that no consumer should escape paying his or her fair share of sales tax. Indeed, that sounds “fair” enough. All of us appreciate driving on pothole-free roads or knowing a firefighter will show up when the house is in flames. So why would anyone oppose a bill that requires collecting taxes that are due? Here’s why we’re opposed: The law would probably spell the end of our family-owned business, for several reasons.
So far this year, we’ve shipped orders to 2,514 different customers, in all 50 states. This means we would be obligated to calculate the individual tax rates for each customer based on the sales tax rate for that zip code on the date the purchase was made, then file returns in all 46 states that collect sales tax. By contrast, a brick-and-mortar store would file one state sales tax return. That’s a discrepancy no one is mentioning when talking about how this bill “evens the playing field” for all merchants.
Audits also pose a threat, since under the current law I could be summoned out of state to argue my case. Pity the online business that gets audited by more than one state.
The government assures small businesses it will simplify the process for us by providing free software. Unfortunately, the cost to integrate this “free” software with our current order-management systems is estimated at about $10,000. Other businesses could pay as much as $300,000.
Proponents argue that the law exempts businesses that make less than $1 million in “remote” revenue. The idea was that that threshold would protect most of the mom-and-pops out there. It doesn’t. This exemption would apply only for the businesses that make so little revenue it would be nearly impossible to support a family with the money left over after cost of goods, wages and business expenses are deducted. If you want to be exempt, make sure you never really make a living from your online business, and make sure you never grow large enough to create any jobs!
The reason our company exists is that we fill a need other merchants don’t or can’t fill. A big-box, one-size-fits-all solution is great for blenders and books and Swiss Army knives. It isn’t so great when it comes to made-to-order mirrors or a custom log table to fit into a tight space. That’s why we have a website. We help customers nationwide who have specific, custom needs for products they won’t find at the corner Wal-Mart. Not everyone needs a 14x23-inch barnwood picture frame, but we can help those who do — even if they live out of state. We don’t want to be driven into extinction as the unintended consequence of a poorly constructed law.
Both of Utah’s senators recognize the inefficiencies of this act and oppose it. They need more grass-roots support. Sen. Orrin Hatch’s proposed amendments (on his Senate website at www.hatch.senate.gov) are a good start. Marketplace fairness is important to us, and so is paying our fair share of taxes. But the current legislation creates a potentially monstrous burden for small and family-owned e-commerce businesses like ours.
Until this bill is amended to mandate specific protections, such as greater simplification and standardization of tax rates across states, an increase in the seller exemption and answers about how state audits would be performed for remote sellers, the Marketplace Fairness Act is anything but fair.
Lynnae Allred is the owner of MyBarnwoodFrames.com.
Copyright 2016, Deseret News Publishing Company