30 Apr 2009
The Main Street Fairness Act – Fair? Hardly!
A thoughtful article was written in Auctionbytes. It talks about the whining and complaining over lost State Sales Tax revenues, and how Government wants to ‘fix’ this with new Federal mandates. I have written both legislators mentioned in this article, as well as the Speaker of the House, and have received non-answers from all of them. I have several questions, and solutions to this problem. It would be nice to have SOMEONE who would listen to ideas and have a dialog of exchange. You, the reader, can help.
~ What about Use Tax? All States have them, yet fail to enforce the law. By simply doing this, they would not need to introduce new legislation.
~ Trying to figure tax for all the tax districts (now at over 5700) is impossible for small business. Hiring a tax service @ $30/$50/mo is an added expense that as a small business, I can’t afford.
~ What about States that have no sales tax? Does this put sellers in those States to have a competitive advantage? No, because the Use Tax even the playing field.
~ Amazon does not collect sales tax except for high volume sellers, and those are few. While it is illegal in some States to sell items as having tax included, Amazon blatantly ignores the law.
These are but a few of my concerns. Now I do have a solution, and it is a simple one, yet getting others to make enough noise for legislators and others to listen has been an uphill battle.
When I have an In-State sale, I have to charge sales tax. Since I have a Tax ID#, it is my duty as a tax collector for my State to do so. When my merchant Account (Visa, MasterCard, PayPal) collects money on my behalf, they also collect State sales tax.
Say I sell an item for $100. Sales tax is $6. Now if the merchant account charges me 3% to transfer the monies, this includes the $.18 fee on the sales tax. But wait a minute. That $.18 does not belong to me … it belongs to the State DOR! That is an additional out of pocket expense for my business. Look at a local Wal-Mart that does $10M sales/yr Sales tax of 6% = $600K Even at a discount of 2% for merchant account fees means an additional business expense of $12,000 for monies that does not belong to Wal-Mart!
That’s the groundwork. Now here is the solution:
Have the Merchant Accounts (Visa, MasterCard, PayPal, etc.) collect Sales and Use Tax and submit the funds directly to the State.. In turn, the States would pay the related Fees for collection. Let us look at the benefits.
~ States get instant funds.
~ Fair collection of Use tax.
~ The collection system is already in place, just add software.
~ Less law needs to be written.
~ Less bookwork needed by Small Business
~ Works for Brick & Mortar Stores as well as Online Sellers.
~ Many States offer a discount when sellers fill out quarterly forms. That fee could be waived if the Merchant Accounts would pay the State directly.
Personally, I am against the collection of out of State Sales Tax. The whole foundation of the idea is unconstitutional and violates the Tenth Amendment of States Rights. Having lawmakers enforce existing law is the best solution, but the alternative solution I offer is a great compromise.
Bottom line, the payment processors can easily collect and deliver the sales tax to the state’s department of revenue, without being collected by the merchant’s. This is using existing laws which aren’t enforced. Enforce them, there is no need for this onerous legislation that will cost as much as it takes in.
As I said, you, the reader can help. Talk about it , blog about it. Make a comment in this blog! Write to you legislators and Congress. Agree or disagree, but say SOMETHING! The last thing we need is for Congress to write bad law, which they are famous for.