What Online Sellers Need to Know about the Marketplace Fairness Act

Have you heard about the Marketplace Fairness Act? If not, be prepared to hear about it quite a bit in the coming weeks.

What is the Marketplace Fairness Act?

The Marketplace Fairness Act was introduced in the Senate in 2011 and would allow participating states to requires that “remote sellers” (i.e. online sellers) collect sales tax.

States are all for this, because the recent recession has left them broke and in the position of cutting services. Collecting more sales tax would give them a larger revenue stream. Online sellers, on the other hand, have understandably mixed feelings.

If you have ever had to deal with the hassle of collecting sales tax, you know that it can be difficult to handle sales tax in one state, let alone all of them. That’s why, if passed, the Marketplace Fairness Act will require every state to simplify its sales tax laws. The complexity of collecting and remitting sales tax is a big reason why there’s been such a push against ecommerce businesses collecting sales tax; it’s perceived to be an unfair time sink. Some detractors even point out that many brick and mortar businesses now have an online element, meaning that this act would disproportionately affect more small businesses than lawmakers realize.

If the Marketplace Fairness Act is passed, states must either opt-in to the Streamlined Sales and Use Tax Agreement or meet several requirements for simplification. When they do, sellers everywhere should find it easier to deal with sales tax.

Is this good or bad for businesses? It remains to be seen. Surprisingly, one backer of the Act is Amazon, which famously fought against states collecting sales tax where Amazon had no physical presence. On the other hand, eBay states they believe the Act will hurt small businesses.

The (Sort of ) Good News

There’s one caveat: In the current version of the act, businesses who make less than $1 million in revenue per year will be exempt from participation.

What do you think? Will the Marketplace Fairness Act even the score for businesses everywhere or is it simply unfair to Internet and other small businesses?

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