What’s New! Marketplace Fairness Act

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Internet SAles Tax

We like to keep our merchants and partners informed about rules and regulations that affect how payments are transacted, and this month we are writing about recent legislation which has already passed in the Senate and is working its way through the House called the Marketplace Fairness Act. This law would require ecommerce merchants to collect and remit sales tax to the jurisdiction of their customers’ location, and not to the state in which the merchant is located. This tax collection exemption has been in place since the advent of the Internet as a way to incent the whole online commerce industry, but spurred by the budgetary woes of the Great Recession it is estimated that states have missed out on about $11.4 billion of tax revenue in 2012 alone. Of course, brick-and-mortar merchants have always complained about the disadvantage of having to compete with their online counterparts that were exempted from charging a sales tax.

But, dear online merchants, before you hit the panic button there are a few caveats: 1)  this would only affect merchants whose gross revenues exceed $1 million per year and 2) states will be required to simplify their tax codes with the goal of making tax collection easier. There are already companies providing the technology to compute and collect these taxes from an ecommerce merchant, so there should be plenty of integrated solutions available if and when the MFA becomes law. Stay tuned…