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What the Internet Sales Tax Bill Means For Small Ecommerce Businesses

What the Internet Sales Tax Bill Means For Small Ecommerce Businesses


Late Monday evening, the Senate passed an Internet Sales Tax bill that empowers (or forces) states to collect sales tax for purchase made online for state and local governments. The measure received a 69 yes to 27 no votes in the Senate, and will move on to the House of Representatives next.

This bill is called the Marketplace Fairness Act, and allows U.S. states to force ecommerce sites with more than $1 million in annual out-of-state sales to collect sales tax from customers and sends them back to state and local governments for where the goods are shipped to.

To combat the burden of juggling various sales tax laws and amounts for all the states on businesses, states will be required to provide software to help calculate the taxes. 

What does this mean for Small Ecommerce Businesses?

Although the states are providing software to help calculate taxes, the cost to be compliant with the bill, if it passes, would solely be the business' responsiblity. This includes collecting, accruing, and redistributing the tax from their customers which stems from updating accounting software, updating virtual shopping cart systems, and having to continously file a steady stream of paperwork. All of this results in a higher cost to be compliant.

Even worse, the new bill could mean tax audits and potential dealings with the bureacracies from the 46 states that collect sales tax.

Amazon strongly supports the bill because they already collect sales tax in the many states that they have warehouses in. It would benefit them if their competitors had to do the same. EBay, on the other hand, is seeking a different version of the bill that exempts any business with less than $10 million in annual sales or fewer than 50 employees.

From a brick & mortar retail's store standpoint, this is to level the playing field as they've spent years having to compete with sales-tax-free internet shopping as their competition. They're tired of customers treating their stores as a showroom and looking for cheaper prices online right in the shopping aisle.

How do you think this bill will affect your business? We'll continue to follow the progress of this bill and keep you updated.


+Alice Ly
Social Media Manager

Sources: CNN Money, USA Today, ZDNet, Market Watch
photo credit: davidrossharris via photopin cc

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