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The internet sales tax bill, known as the Marketplace Fairness Act, currently being ramrodded through the US Senate, would give the individual states the authority to require online merchants to collect sales and local taxes based upon the taxing jurisdiction of the purchaser. Currently, online merchants are only required to collect sales and local taxes from purchasers where they have a physical nexus. Those sales and local taxes are based upon the actual merchant, not the location of the purchaser.

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.

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