Proponents of the bill argue that it is necessary to level the playing field between brick and mortar stores and online merchants. That brick and mortar stores are at a competitive disadvantage because their online counter parts are not required to collect sales and local taxes. Proponents are very fond of saying, and promoting, that given the technology today, requiring online merchants to collect the taxes for every single different taxing jurisdiction in the US is “not that difficult”. Senator Dick Durbin, D-IL., a strong supporter of the bill has been quoted as saying… “Thanks to computers and thanks to software it is not that complex.” Calculating multiple taxes has never been the problem. That’s not the issue but it’s what the proponents want you to believe.

Under the proposed bill, states would have to provide… “software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed.” That’s 46 different pieces of software from the 46 different states. Have you ever tried to get 2 different software programs to work together? What do you think is going to happen with 46? Now you have to integrate those 46 programs into a shopping cart. So now… free of charge… each state needs to provide software that is compatible with the other 45 states AND make it compatible with every single shopping cart in order for it not to be an undue burden. Do you really think that’s going to happen?

If enacted as currently written, online merchants with more than $1M in sales, could be required by the 46 states that currently collect sales and local taxes ( I say could but cannot imagine a state not requiring it) based upon the location of the purchaser. That’s some 9000 different taxing jurisdictions. It would force those online merchants who are not exempt, to departmentalize their products by the taxing jurisdiction. An online merchant with as few as 1000 products would find themselves in the position of having to create some 9,000,000 different accounts in order to accurate track and report their product sales. Does that sound “easy” to you? Does that sound “not that difficult” to you?

Proponents are also fond of saying that brick and mortar stores have been calculating multiple sales and local taxes for decades. Not from a single location they haven’t been. Will this bill, as currently written, require them to collect taxes based upon the location of the purchaser? Nope. Will it require them to departmentalize all the products they sell by purchaser location? Again, nope.

I am in favor of taxing internet sales. A sales tax is one of the ways to generate the most amount of revenue while doing the least amount of harm. But the Marketplace Fairness act does not do that… not even close. It places undue burdens on internet retailers. It will crush small online businesses and hurt consumers to the benefit of big business and big government. I don’t see anything fair about doing that.

I use Authorize.Net and I’ve recently started shipping to Canada. I immediately started encountering problems with the Canadian postal codes (which contain letters) being shown as an AVS mismatch by Authorize.Net. Upon contacting Authorize.Net support, I was told that the customers were providing the wrong information. All of them? None of them know or used their proper postal code? That got me thinking.

I remembered a similar problem I was having with US street addresses that contain a letter rather than all numbers. Wisconsin is a good example of where this occurs. Every single one of those transactions returned an AVS mismatch by Authorize.Net. When I contacted Authorize.Net support when I first noticed this (was years ago) I was told that they do not support the use of letters in the street address. To double check, I went back over transactions submitted this year and sure enough, every single one that had a letter in the street address was returns as an AVS mismatch by Authorize.Net.

Now I don’t know where the problem lies. But there is a problem that does not lie with the merchants, and the response I got from Authorize.Net was completely unacceptable. More and more the onus of verifying information to help protect consumers from the potential misuse of their credit card information falls directly into the laps of merchants. At the very least, the AVS system should be able to be counted on by merchants as a tool to help them protect their customers from the potential misuse of their credit cards and themselves from potential fraud. I don’t know if the failure is solely that of Authorize.Net. But at the very least, as a merchant, a customer of Authorize.Net, I deserved an honest answer and some support for a problem that has existed for years.

In 2006 consumers used their credit or debit cards to spend approximately $160 billion at fast food restaurants alone. That’s a lot of transactions. Total online sales were projected to reach more than $250 Billion in 2007. Credit card fraud amounts to billions of dollars a year. But who is it that is really looking out for you? Who is it that is really being proactive about protecting consumers from fraudulent use of their credit cards before it happens? It’s not your bank.

Sure, you can contest a charge you didn’t make and there are laws in place to help protect you from being obligated to repay those charges. But that’s all after the fact. After your bank has already approved the transaction. If you think it’s your bank that pays for those charges you’d be wrong. It’s the merchants and ultimately you, the consumer, through higher prices, not your bank who issued the approval for the charge in the first place.

When you apply for a credit card, you provide the issuing bank with a wealth of information. Personal and private information that identifies you and ties you to your credit card. Information your bank has at its finger tips. When you make a purchase online, you provide merchants with personal and private information. The same information you provided your bank. How much of that information does your bank verify before they issue an approval for your online credit card purchase? Very little.

When you make a purchase online, your bank verifies the card number, expiration date, and security code. That’s it. That’s all they look at before issuing an approval for a purchase. That and your available credit. But what about your address or zip code, they have that on file, do they even transmit the information for the merchant? Nope, they don’t even consider it when issuing an approval. Why? Good question to ask your bank. Ask them why it is they don’t bother to verify information they have right at their finger tips before they issue an approval and feel free to post their answers here. They ought to be “interesting” to say the least.

So who is it that verifies this information after your bank has already approved the transaction? After the amount of your online purchase has already been held against your credit or debit account by your bank? It’s the merchant. Ever had an online purchase declined because an address or zip code didn’t match yet still see the amount being held against your credit or debit account? That’s because your bank approved the purchase but the merchant, in an effort to protect you, as well as themselves, declined the purchase. Ever had a merchant call you to verify a purchase or address? That’s because the merchant is trying to protect you and them from a potentially fraudulent purchase after your bank has already approved it.

I invite any of you to ask your bank why? Why they do not verify the information that you provide when making an online purchase before they approve that purchase. Why they make it incumbent upon the merchant to verify information, information that they themselves provide, instead of verifying it themselves before they issue an approval and hold your money. Why reputable merchants are doing more to protect you from the potential misuse of your credit card and decline transactions than they are.

Inquiring minds want to know.

Dave