MARKETPLACE FAIRNESS ACT
2013
AGENDA
• What is MFA? Who is pushing it?
• Will MFA pass and become law, and if it does when will I have
to collect sales tax?
• What is Streamlined Sales Tax ?
• What will I have to do to comply with the law?
• So the software is free?
• What other compliance issues will I face?
• Will I get audited by 46 states?
• What is a sales tax audit like?
• Questions???
eMainStreet.org
WHAT IS MFA?
Marketplace Fairness Act 2013
Remote Sellers with sales outside of home state
over $1,000,000 can be required to collect sales tax
for any state they do business
States must meet Streamlined Sales Tax rules or
provide free software to calculate sales tax.
Each state must have single tax form and point of
contact
States include all US Territories and Indian Nations
= 50 states +DC, 5 Territories, 566 Indian Tribes
WHY – WHO IS PUSHING THIS?
Over $50m spent lobbying for MFA
( big box retailers and states hungry for revenue )
States passing laws / budgets –
lower taxes if MFA passes ( or house the
homeless / end poverty ..)
Only $3m spent lobbying against
(eBay, ATR.org, catalog companies)
Our “friends” are against us ( Amazon,
Shop.org are supporting MFA )
OBJECTIVE – weaken and /
or eliminate competition (
US!!)
WILL IT PASS? AND WHEN?
Passed 69 for 27 against Senate May 6th
More opposition in Congress including key
lawmakers ( e.g. Boehner house speaker)
Currently under review by Judiciary
Committee
Start collecting 180 – 270 days after it passes
Our best guess
Pass without amendment 20%
Pass with amendments in 12 months 40%
Killed off or delayed over 12 months 40%
Democrat control of Congress in 2014?
STREAMLINED SALES TAX
Members: Arkansas, DC, Georgia, Indiana,
Iowa, Kansas, Kentucky, Michigan, Minnesota,
Nebraska, Nevada, New Jersey, North Carolina,
North Dakota, Ohio, Oklahoma, Rhode Island,
South Dakota, Tennessee, Utah, Vermont,
Washington, West Virginia, Wisconsin,
Wyoming
Members = 33% of US population
Standard taxability matrix ( = product categories )
Rates and boundaries database ( Zip + 4)
NON STREAMLINED STATES
The big ones with complex sales tax laws, CA,
TX, PA, NY, FL etc.
Members = 67% of US population
Different Sourcing Rules ( double taxation will occur)
Confusing categories ( e.g. in PA - Clothing non taxable, safety
clothing taxable, worn safety items non taxable for some industries )
Must provide
Rates and boundaries database ( Zip + 4)
Taxability matrix ( non standard with different categories )
Free software ( who will write it, will it work?)
Single point of contact and tax return
COMPLIANCE COSTS
Learn Sales Tax laws for 22 + states
Review free state software, compare to
commercial
Implement up to 22 different APIs with all
Shopping Carts, Accounting Systems , Back
End, ( Amazon, eBay, ….?)
Categorize products for 22 States
Collect taxes, remit monthly
Territories and Indian Tribes – disallow
sales if they require collection of sales tax (
cost > profits)
Conclusion COMPLIANCE
NIGHTMARE
SALES TAX COMPLIANCE COST
Percentage of Revenue v Sales Revenue
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Series1
TAX COLLECTED v COMPLIANCE COST
$240b in sales, 80% big box = taxes collected
$48b sales not taxed = $4b in lost revenue
$400m max for CA not $1.1b
Cost of compliance first 2 years = $4b estimated eMainStreet
$9 to $32 per return, even if tax is $0
Think $1m retailer filing on Vermont
States do not care about our compliance costs!
FREE SOFTWARE?
SST provides free software now ( vendors
keep 2% taxes)
No requirement SST software to be free
when MFA passes ( states will protect their
taxpayers – >not free)
Non SST states free software quality is
unknown
May use existing SST CSP Avalara, Taxcloud,
Taxware, Exactor, CCH, Accurate Tax
Worst case 22 different tools, non API software,
no shopping cart support
Amazon / eBay will do their own thing!
Possible White Knights – Google?
SOFTWARE COST
CSP per Transaction $0.05 - $0.30
$9 to $32 per form per state per month / quarter
API Integration $5,000 per state per cart
Integrate Tax Software with Amazon / eBay / CRM
Backend phone & manual orders / Accounting
System
SURVIVE A SALES TAX AUDIT!?
Personal Liability for under collected taxes (jail time?)
Pay all under collected taxes, over collected does
not offset
No statute of limitations, go back 20 years
Not protected from Misclassification errors
Auditors will come back if cost of audit < extra tax
Pays to make auditor work
Can take 1 month on site
State is Judges and Jury
Travel to state to defend in court
CASE LAW
Need special legal software to access
Example Official Flags of US are not taxable
Historical US Flags 48 stars, Betsy Ross?
Marine Corps, Army, Navy?
State will always read laws to gain maximum tax
Must appeal for relieve -> goes to case law
Travel to state for hearing
Must respond within time allowed
ACTIONS
Join eMainStreet.org ( that’s US !)
Contact your Representative and Senator
Join us for fly in to Washington DC June 25th
MarketplaceFairness.org ( aka the enemy )
TrueSimplification.org
MORE INFO
eMainStreet.org ( that US !)
Sales Tax guide Wikipedia ( Sales Tax in United States)
StrealinedSalesTax.org
MarketplaceFairness.org ( aka the enemy )
TrueSimplification.org