Congress is considering a bill that would allow states to collect sales taxes from online retailers. Proponents say a law is necessary to level the playing field with brick-and-mortar stores and to raise revenue for states.
Simply put, the Marketplace Fairness Act would require any online retailer with more than $1 million in annual sales to collect and remit sales tax. But Joseph Henchman, a vice president at the nonpartisan Tax Foundation, says it's not that simple. He says the bill, at about five pages of text, is unusually brief. And, he says, it doesn't come close to matching how complex collecting sales tax can get.
"It also doesn't include a lot of detail about implementation," Henchman notes. For example, the bill says the states will have to provide automated tax software to businesses free of charge. But what if a business' existing systems don't work with available tax software? Who pays? What if a state doesn't provide adequate software? To whom should the business take its complaint?
Fearing A Logistical 'Nightmare'
These are the types of questions that dog Stacey Strawn, president of the gift shop Silver Gallery. The business has a small storefront in Waynesboro, Va., but the lion's share of its $3 million in annual sales are made online and over the phone. Strawn, like some other online retailers, is crying foul on the bill. Trying to comply with the law, she says, would "be a nightmare."
If the law passes, Strawn would have to collect taxes for every purchase, then remit them to every state and local government where her customers live. She says software that automates tax collection is not a plug-and-play solution that meets all needs.
"Something gets exchanged and it's sent to another state. Then we have to figure out how to refund the taxes from the first state, collect our refund from that state, then charge the customer the new tax," she explains.
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