Electronic Retailers Take a Flier at the Marketplace Fairness Act

E-coms, catalog sellers, and direct response marketers who market and ship products across state lines are still hopeful that the Marketplace Fairness Act, passed by the Senate on May 6, will get a thumbs down from the House of Representatives. They’re not counting on that eventuality, however, so 100 of them will be joining the Electronic Retailing Association’s (ERA) Capitol Hill fly-in next week to voice their opposition to representatives of key states such as New York, New Jersey, Maryland, Virginia, and California. The effort follows a similar Hill assault mounted recently by members of the American Catalog Mailers Association (ACMA).

Remote sellers find little fair about the Fairness Act. They would prefer that the 1992 “Quill” decision handed down by the Supreme Court, affirming interstate tax collection as unworkable, prevails. But should a bill land on President Obama’s desk, they are insisting that it contain simplifications for businesses to administrate and pay taxes to some 9,600 jurisdictions in 46 states.

“Our biggest concern is liability issues. [Each state has] different codes. You have to know all the rates, all the definitions, and if you don’t and you under-collect, you have a class-action suit on your hands,” says Bill McClellan, the ERA’s VP of government affairs. “There’s this belief on Capitol Hill that there is a software program that will make this easy for remote sellers to implement. They underestimate the complexity of integrating this into the online retail space.”

One small online retailer says that if the Marketplace Fairness Act doesn’t put him out of business it will at the very least render him uncompetitive. “If you have an online business doing $50 million a year and you have to invest $200,000 in new systems and people to keep track of all these taxes, it’s not a big deal,” says Vladimir Gendelman, president of Company Folders, an online stationery business. “But if your revenues are $2 [million] to $3 million, this presents a problem. Competition online is high, which means profit margins are small. At the end of the day, there’s not a lot left over to grow your business.”

One of the key points the ERA group will be making to House representatives next week is that the positioning of the bill is skewed. “It’s positioned as Internet retailers having an advantage over brick-and-mortar retailers, but it’s really an issue of big versus small,” McClellan says. “If you look at the list of top Internet retailers, the names you see are brick-and-mortar chains like Walmart and Target. And Amazon changed its position to favor the bill once it started expanding facilities across the country.”

ERA President and CEO Julie Coons is concerned, too, that legislators are leaving consumers out of their deliberations. “Even for large organizations this [law] will represent additional cost, and additional cost is always passed along to customers,” Coons says. “Consumers will experience this as a new tax, and we want to talk to members of Congress to make sure they are being fair and equitable.”

The ERA has joined with the ACMA, the Direct Marketing Association, and NetChoice in an effort called TruST (True Simplification of Taxation), which offers up 12 guidelines for remote tax collection. These include a single tax rate for all remote transactions, common definitions of taxable items, harmonization of state tax holidays and thresholds, and preemption of individual state tax laws along with the formation of a single audit authority.

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