In late 2011, Congress presented a new bill entitled Marketplace Fairness Act. The purpose of this bill is to set standards for online sales tax for the eCommerce community. Currently, the tax code is set by individual states. For example, some states only require you to pay Sales Tax if you are shipping product to the same state that your business is located in, and some states make you pay sales tax on anything and everything even if you do not have a location in the state that you are shipping to. The Marketplace Fairness Act would take away the guessing game and make eCommerce businesses subject to tax codes for the state tow which they are shipping.
You may be asking yourself, “Why is this issue coming up now?” Well, some of you may or may not be aware of this, but our government is in the hole around $16 trillion dollars, so collecting more money will help them out. It is estimated that if online businesses were required to collect sales tax on every sale the government could collect around $20-$40 billion in additional taxes, so that is a pretty decent amount of money.
Another reason why this is coming up is to be “fair.” Online retailers have a competitive advantage over brick and mortar stores. Brick and mortar stores are required to pay sales tax on every single item that is sold in their stores. If you search online you are bound to find a retail store that will not charge you sales tax, which in the end could save you up to 10% depending on your state tax rates.
With the rise in online sales increasing every year it is only a matter of time before sales tax regulations will be enforced on eCommerce businesses. One way to stay ahead of the curve is to implement an automated taxing program, like Avalara. Cart32 and Avalara will be hosting a free webinar on Tuesday, August 21 at 1pm CST (click here to register) to discuss Avalara’s tax software and how it can automate the tax process for your eCommerce business.
In my opinion, a new sales tax regulation for eCommerce businesses is going to happen and the best option for you is to be knowledgeable about the situation and start developing a plan for your business. Sales Tax for the online retailer will be a beast. Each state has their own tax codes and keeping up with their requirements would be a daunting task. Finding a solution (like Avalara) to automate the process will be your best bet.
Cart32 will continue following the Marketplace Fairness Act and update you on its status frequently.