As the Marketplace Fairness Act of 2013 moves through the legislature, it is important for business owners conducting online sales to closely monitor—and prepare for—the potential implications on their businesses. The current tax code does not require online retailers to collect sales taxes in states in which they do not physically operate. The bill is designed to eliminate an advantage held by online retailers over brick-and-mortar sellers. Opponents of the bill argue that the need to comply with tax regulations in many different states would unfairly burden small business owners.
How might your business be impacted?
- Online retailers exceeding $1 million in annual sales must collect state tax even in states where they do not have a presence, beginning the first day of the first quarter that is greater than 90 days after the law is enacted.
- Smaller online retailers will not be impacted (as the bill is currently written).
- Brick-and-mortar stores, assuming they are not also large online retailers, would benefit by losing fewer customers to online retailers. Consumers often shop for products in physical stores but make final purchases online to avoid sales taxes.
Some states may choose not to enforce sales taxes on out-of-state online retailers. Those that choose to do so must simplify their sales tax regulations before being granted authority to enforce the law.
Business owners should monitor this bill (or any legislation with the potential to impact their businesses) for changes, timelines, etc. as it moves closer to becoming law.
Learn more about the Marketplace Fairness Act of 2013:
Content contributed by Ryan Pingel, State of Ingenuity SourceLink (Wisconsin/Illinois).
State of Ingenuity SourceLink is a proud affiliate of U.S. SourceLink, America’s largest resource network for entrepreneurs.