SEATTLE, Nov. 9, 2011 /PRNewswire/ -- FedTax® joins its more than one thousand TaxCloud® merchants in applauding Senators Enzi (R-WY), Durbin (D-IL), Alexander (R-TN), Tim Johnson (D-SD), Boozman (R-AR), Reed (D-RI), Blunt (R-MO), Whitehouse (D-RI), Corker (R-TN), and Pryor (R-AR) for introducing the overwhelmingly bipartisan Marketplace Fairness Act. This bill allows states that have simplified their sales tax laws to require all retailers to collect existing sales taxes on Internet purchases.
"The Marketplace Fairness Act will finally bring sales tax laws up-to-date with e-commerce," said David Campbell, CEO and cofounder of FedTax. "It grants almost immediate collection authority to the majority of sales tax–collecting states while providing clear and easy-to-follow guidelines for the remaining states to simplify their sales tax laws."
Not only does this bill help small businesses by offering states an incentive to simplify sales tax regulations, it also helps local retailers that have been struggling to compete with online retailers that have not had to collect sales tax. The bill also exempts retailers with less than $500,000 in annual sales from having to collect sales tax in states where they don't have a physical presence.
How the Marketplace Fairness Act Works
The Marketplace Fairness Act grants states the authority to compel online and catalog retailers, no matter where they are located, to collect sales tax. But there is a caveat: States will only be granted this authority if they have simplified their sales tax laws. Two Supreme Court rulings (Bellas Hess, 1967, and Quill, 1992) cite concern that collecting sales tax for multiple states would be too difficult. The proposed legislation requires that states simplify their sales tax laws in order to ease those concerns and make multistate sales tax collection easy.
Under the proposed legislation, states seeking collection authority have two options for simplifying their sales tax laws. They can join the twenty-four states that have already adopted the simplification measures of the Streamlined Sales and Use Tax Agreement (SSUTA), which was developed over the last eleven years by forty-four states and more than eighty-five businesses with the goal of making sales tax collection easy.
Alternatively, states can meet essentially five simplification mandates listed in the bill. States that choose this option must agree to:
- Notify retailers in advance of any rate changes within the state
- Designate a single state organization to handle sales tax registrations, filings, and audits
- Establish a uniform sales tax base for use throughout the state
- Use destination sourcing to determine sales tax rates for out-of-state purchases (a purchase made by a consumer in California from a retailer in Ohio is taxed at the California rate, and the sales tax collected is remitted to California to fund projects and services there)
- Provide software and/or services for managing sales tax compliance, and hold retailers harmless for any errors that result from relying on state-provided systems and data
With states adhering to these provisions or the similar measures in SSUTA, retailers across the country will find collecting sales tax for multiple states much easier than it has ever been in the past.
Technological advances have eliminated historic burdens and costs
The world has changed quite a bit in the forty-four years since the Supreme Court worried about the difficulty of multistate sales tax collection in Bellas Hess. "Modern technology now makes it easy for businesses to comply with the Marketplace Fairness Act," said Campbell. "In fact, our TaxCloud service handles every aspect of sales tax management for free, making collecting sales tax easy and affordable for any business -- from sole proprietors to the Fortune 500. We're happy to see the Marketplace Fairness Act introduced with sponsors from both sides of the aisle. It's truly a bipartisan issue, a matter of fiscal responsibility and tax equality."
TaxCloud calculates the sales tax due in real time, files tax returns, generates monthly reports, handles audits and tax exemptions, and more. It is also certified to comply with SSUTA, which means that TaxCloud offers businesses the advantages of tax amnesty and indemnification from states that participate in SSUTA.
Enacting the Marketplace Fairness Act will ensure sales tax laws reflect the world we live in, not the world of 1967. Online shopping has grown dramatically in the past decade, and it continues to increase. That growth owes much to technological advances -- and those same technological advances now make it possible for retailers to easily collect sales tax for every state. The time is right for the Marketplace Fairness Act.
FedTax makes it easy for businesses to calculate, collect, and remit sales tax with its free TaxCloud sales tax management service. It was founded by e-commerce veterans who have extensive experience in large-scale internet services and have been directly involved in building some of the most recognizable brands on the internet, including Google, American Express, Microsoft, and Expedia.
FedTax has been designated a Certified Service Provider by the Streamlined Sales Tax Governing Board. The company's free TaxCloud service is relied upon by over 1,000 businesses to calculate and remit sales tax across the country. TaxCloud can be easily integrated into most accounting, order management, and e-commerce shopping cart systems.
FedTax is headquartered in Seattle and has offices in Connecticut and Kansas.
SVP Sales & Marketing