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Questions regarding the Marketplace Fairness Act

Written by: Moser, James on Apr 23, 2013

The US Senate on Monday passed the Marketplace Fairness Act which seeks to empower states and territories to collect sales and use taxes on products purchased over the internet and shipped into their tax jurisdictions.  

Leaving aside the politics, here are some key points:

Small Seller Exemption   

Section 2, subsection C of the Senate bill exempts remote sellers with "...gross annual receipts in total remote sales in the United Stated in the preceding calendar year..." of less than $1 million.  There has been some discussion that this number will be raised to $10 million, though the text bill does not reflect that.  

Will I have to collect, file, and remit taxes in all 50 states, the District of Columbia and the territories?

Maybe. States are not obligated to collect sales taxes from remote sellers.  Section 2 of the act states that "A State may exercise authority under this Act beginning 90 days after the State publishes notice.." of their intent to do so. Non-member states ( D.C. and the territories ) are forced to wait 6 months before they can begin to enforce the Act.  Several states do not have sales taxes, and given that this is optional on the part of those that do, the number of states that require collection and remitting will change over time.  

How can I deal with 9600+ separate tax rules?

That's going to be challenging for your E commerce provider but not for you, though will still have to write all of those checks.  The states must do 3 things before they publish their intent: 

  1. They must "...provide a uniform sales and use tax base among the state and local taxing jurisdictions within the State.."  That means that each will effectively have a homogeneous taxing algorithm.  
  2. Provide ( free of charge ) software to calculate tax liability for each transaction in real time  this software must also be capable of filing sales tax returns. 
  3. Provide a mechanism for certifying software providers and keeping them informed of rate changes in a timely manner.  

What if there are mistakes?

The Act protects sellers from liability incurred due to errors made by certified software providers.  It also protects certified software providers from bad information given them by the remote sellers.  

What is Cairn Applications doing about the Marketplace Fairness Act

Many of you will be aware that Cairn has been building a new proprietary E Commerce solution called myStore. The Marketplace Fairness Act has been in the works during most of the this development cycle and as such we have built in a tax calculation module.  At present, the module is little more than a placeholder, given how little is known about this Act and it's viability.  

This tax module will be activated by a user option on myStore and it looks like periodic ( monthly, yearly ) reviews of the trailing 12 months sales will be necessary in order to tease out our client's  small seller exception status.  

We have a number of questions regarding the implementation of the law and have been in contact with U.S. Senator Kelly Ayotte's office for Clarification.  Mr. Thomas DeRosa at the Senator's Office is looking into our questions but was able to give the following: 

  • While the Bill did pass the Senate on Monday, it has yet pass in the House of Representatives.
  • Speaker of the House John Boenher is adamantly apposed to the Bill as are a number of representatives.
  • Mr. DeRosa was clear that we are a long way from this bill becoming law. 

Should the Marketplace Fairness Act become law, Cairn Applications will be seeking certification as a software provider in order to give our customers' customers the best possible e commerce experience with the least hassle over taxes.

Here is a copy of the Marketplace Fairness Act gleaned from marketplacefairnessact.org/bill-text/

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