Can Small Businesses Handle An Internet Tax?

Can Small Businesses Handle An Internet Tax?

A recent bill, the so called "Marketplace Fairness Act", would grant states the authority to require online businesses to collect state, and local sales taxes from the buyer at the time of transaction payment, regardless of location that the product will be shipped to, or whether you have a physical  business presence in that particular state.

As currently, proposed, the bill exempts businesses with out-of-state gross  sales receipts of less than $1 million dollars.  While that might seem like a  lot of money to some, many businesses that operate just outside of this range  have margins that range between 5 – 10 percent.

Currently, there almost 10,000 taxing jurisdictions that operate in 45 states that collect sales tax. most of these states require that you complete a monthly electronic return through specialized fee based software programs at fees exceeding $35 a return.  If you do the math that’s almost $19,000 a year to file returns, and that doesn’t include the cost of hiring staff to do the returns, and deal with state auditors, additional costs of sending amended  returns, paying for software upgrades, and associated technical support.

For many online retailers, this could end their ability to compete online because the increased overhead could wipe out any profit that they might have, and in many cases actually end-up costing them money to have  an online presence.  The end result would require them to raise prices, which means that the business may be unable to compete with many of  larger  retailers such as Amazon.com, Home Depot,  Best Buy, and Walmart.  These Retailers are nationwide, and are already required to collect sales taxes in the states and counties that they sell in.

What can I do participate in the is bill?

It’s recommended that you contact your Congressman, if you wish to appose this bill.

– John

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