Marketplace Fairness Act of 2013: States to collect sales tax in other states

December 9, 2013 Updated: April 24, 2016

Legislation currently pending in Congress dubbed the “Marketplace Fairness Act of 2013” would allow state governments to collect sales taxes across state lines, from companies that conduct business on the Internet and have no physical presence in the state in question. Online retailers say this puts an excessive burden on their business; they would need a tax lawyer from every state.

Many of these businesses are small to mid sized and ship internationally, helping to balance the trade deficit. Collecting a sales tax from everywhere they ship to, would put the virgin companies out of business. Essentially, the states are just using small businesses to collect extra revenue for them, some say.

Jackie and Sharon Wallace, a husband and wife team that just started an online business are not sure how the legislation would affect them. “At first thought we are divided on whether or not the Marketplace Fairness Act of 2013 would be beneficial to us or not,” said Sharon. Jackie added, “Almost all of our business comes from out of state and even more so from international sales. Our customers already have to pay increases in shipping costs which occurred last year.”

Advocates for the bill claim the new law places online retailers on a level playing field with brick-and-mortar establishments. These advocates say online-only retailers do not add to the local economies like brick-and-mortar operations, in the form of charitable contributions and such.

Jackie disagrees saying the business brings in money (from overseas) into Richmond County just as any other local business. “The appeal of shopping online is not generated from customers who are trying to get out of paying taxes, but rather customers that shop online are looking for products that are not usually sold in stores within their communities,” said Sharon.

From a local business standpoint Jackie said, “Our concern is whether or not the Marketplace Fairness Act will cause more burden to fall on the businesses that are involved,” he said. “If business owners have to spend more time doing paperwork, then realistically, that really does take away from the time actually spent earning an income.”

U.S. House Representative Richard Hudson is reviewing the issue and has not made up his mind yet. In an email, Hudson wrote that he supported “simplifying our tax system so our businesses can grow, hire more people and turn a profit. Our tax system should be fair, simple, and it should encourage competition. I understand the issues surrounding the Internet sales tax and am reviewing the set of principles Bob Goodlatte, chairman of the Judiciary Committee, released earlier this fall.”