National Governors Association Promotes Marketplace Fairness Act

June 20, 2013 -

Yesterday governors, legislators, congressional leaders, technology companies and small business owners held a meeting to promote the Senate's recently passed Marketplace Fairness Act legislation, which proponents hope will get the same kind of approval in the House. The bill creates ways for states to collect online sales tax across state lines. Traditional retailers say that these taxes level the playing field because it forces all businesses to collect sales tax, and takes away the tax-free advantage online retailers have had for years. The meeting was spearheaded by the National Governor's Association (NGA) and was designed to convince lawmakers in the House.

“This has long been a priority issue for the nation’s governors,” said NGA Executive Director Dan Crippen. “This bipartisan legislation seeks to reverse federal intrusion into state tax authority and keep jobs in our communities and bring much needed revenue to strained state budgets across the United States. The Internet has spurred our economy and increased choice, but it does not need a subsidy—it needs to follow the rules like everyone else.”

Getting the bill passed in the House will be an uphill battle because it is controlled by Republicans and many have made a pledge not to raise taxes. Breaking such a pledge will likely be used against them when they return home for reelection during the next election cycle.

 


Comments

Re: National Governors Association Promotes Marketplace ...

In my career I've seen a lot, lot, lot of brick and mortar small businesses whine about this. Here's the solution:

Get. An Online. Store.

We're not living in 1998 anymore. A chimpanzee can set up an online store with BigCommerce in ten minutes. Stop whining and compete.

Re: National Governors Association Promotes Marketplace ...

Better yet, someone should start a service that makes it really easy to incorporate in delaware and provide lawyers to stop local governments from taxing them.

The problem is, we are not talking about a better way of doing business that is taking over.  We are talking about companies that have found an economic advantage in abusing a set of laws that are too expensive for localities to enforce.  

There is also the problem that primarily online stores are taking advantage of local infrastructure but not contributing to it.  They can charge less because other people are actually paying their taxes.

Re: National Governors Association Promotes Marketplace ...

The problem is, we are not talking about a better way of doing business that is taking over. 

That is exactly what we are talking about. Online businesses are more efficient, cheaper and better for the customers. So customers flock to them rather than go to a local store that has higher prices and a lower guarantee that the product you actually want is there. That is competition.

We are talking about companies that have found an economic advantage in abusing a set of laws that are too expensive for localities to enforce.

What abuse? There is no abuse here. The law says that you only have to collect sales tax if you have a physical presence in the state. Amazon and other online retailers collect sales taxes for residents of those states that they have a presence in. So where are you getting this whole "abuse" thing from?

They can charge less because other people are actually paying their taxes.

Again, you are wrong. They charge less because they have a lower overhead. They don't have to higher showroom staff. They can store a larger supply of product in a smaller facility. They created efficiencies and conveniences that customers love that allow for them to sell more products at lower costs. This has absolutely nothing to do with "taxes".

Re: National Governors Association Promotes Marketplace ...

So customers flock to them rather than go to a local store that has higher prices and a lower guarantee that the product you actually want is there. That is competition.

Product availability, I will agree that is something that online retailers have an earned advantage in.  Price?  Maybe some, but not as much a they should have.

What abuse? There is no abuse here. The law says that you only have to collect sales tax if you have a physical presence in the state. Amazon and other online retailers collect sales taxes for residents of those states that they have a presence in. So where are you getting this whole "abuse" thing from?

For nearly a decade I got all my orders from Amazon tax free, even though they had a warehouse only a few miles down the road from me.  I do not know how they got around this much spoken of 'physical presence' requirement, but a lot of the bigger retailers did.  After they started getting pressure and worry about regulation, then magically they started collecting those taxes.  Before that they had some creative bookkeeping to explain why they did not have to pay.   Many companies also keep shells in delaware or other tax free states and find ways to make it look like their sales are officially transacted there.

It is an abuse because there is and always has been a sales tax involved, but the cost of going after every customer in your state is prohibitive, so online retailers take advantage of the wide spread violation of the law since it means their customers are paying less.

Again, you are wrong. They charge less because they have a lower overhead. They don't have to higher showroom staff. They can store a larger supply of product in a smaller facility. They created efficiencies and conveniences that customers love that allow for them to sell more products at lower costs. This has absolutely nothing to do with "taxes".

Actually it is both, but beyond the direct cost savings of skipping sales tax, the entire economy they exist in, their ability to make those improvements, the infrastructure they depend on, the customers they depend on, the employee pool they can draw from, the legal contracts and support system that keep them running, all of those things depend on a tax supported government.  Take that away and they can't exist, and there are reasons that the big retailers do not set themselves up in impoverished or failed regions.  They draw on the advantages that the tax base provides, but they have found a way to skip a significant portion of their paying into it.  So they are drawing the same benefits as their brick and mortar equivalents but paying less in.  And if more and more companies do this, all it will do is shift an increasing amount of the burden onto companies that can not.

Re: National Governors Association Promotes Marketplace ...

Do you believe that sales tax is the only tax businesses pay? That is what it sounds like. Of all the taxes paid to governments by businesses, sales tax is typically the smallest. Income tax, corporate tax, and property tax are all being paid according to the laws in which they reside.

As for local infrastructure (as in local to the customer) Those people pay property and income taxes. 

As for why Amazon wasn't charging you sales tax, that was probably either before the Supreme Court ruling was shown to apply to them, or they had worked out a special deal with the state to avoid sales tax collection for a limited time in order to build a facility there. Amazon and other businesses have been known to do that.

Re: National Governors Association Promotes Marketplace ...

It doesn't work that way. Let's take Best Buy. They have brick-and-mortar stores in pretty much every state (or perhaps every). What this means is, under the law, if they start an online store that ships to customers anywhere in the US, they have to pay sales taxes based on the location of the customer (and the nearby stores). Under the law, if a company has a substantial physical presence in its state, as brick-and-mortar stores by definition do, they have to collect taxes for online purchases. Creating the online store does nothing to get them around paying taxes.

Re: National Governors Association Promotes Marketplace ...

Best Buy is not a small business, Info.

Re: National Governors Association Promotes Marketplace ...

I don't think that is what he was trying to say. I think what he was going with was that if brick and mortar stores are having that much trouble competing with online businesses, then perhaps they should get online and capture a wider market.

Re: National Governors Association Promotes Marketplace ...

Reading it again, that's a possible interpretation I missed. Thanks for pointing that out. That's a fair point, but it still leaves a tax discrepancy between companies that also have brick-and-mortar stores in a given state and those which don't.

Re: National Governors Association Promotes Marketplace ...

It doesn't leave any discrepancy. If I buy from an online store with a presence in Oklahoma, I pay Oklahoma sales tax. If I buy from one that does not have a physical presence in Oklahoma, I don't. That is how it has always been.

Re: National Governors Association Promotes Marketplace ...

I will be curious to see what the final version of this bill will look like.  If the deal with that pesky definition of a 'small business' issue this could really be a good thing.

I am kinda tired of companies take advantage of the fact other people are paying taxes but find ways to not pay their own.  Then again that has become part of the new american dream, hasn't it?

Re: National Governors Association Promotes Marketplace ...

Wow. A Group of government leaders support a program to funnel more money into the government? Who would'a thunk it?

Re: National Governors Association Promotes Marketplace ...

Not really that much of a given.  Plenty of politicians build their careers off just the opposite, esp given how popular libertarianism is right now.

 
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