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BFS Capital Blog

The Marketplace Fairness Act and Small Business: Controversial or a Perfect Fit?

January 6, 2017

Rarely a week goes by when the media isn’t reporting on a new trend, prediction, event or potential law that will have significant impact on small business. One of the current topics is the Marketplace Fairness Act that would require online businesses to collect sales tax from all 50 states.

Although the National Retail Federation (NRF) and others support this bill as a way of leveling the retail playing field among online and brick-and-mortar enterprise, the bill is hugely controversial, according to WebProNews. Opponents say it will hurt various groups, including small businesses, especially those owned by minorities and women.

A study by the Minority Media Telecommunications council supports these claims and says that the $1 million business exemption won’t really protect these businesses and should be more like $10 million to provide real protection for small businesses as we know them in the U.S. today.

One of the most vocal opponents of the bill is Americans for Tax Reform, which lists a variety of problems with it, including that it threatens privacy and gives too much tax authority to states. But by far this group’s biggest concern is the potential impact on small businesses, who would have to somehow meet more than 9,000 highly variable state and local tax codes—and would even have to settle disputes with state revenue boards in out-of-state courts. It seems pretty obvious that for thousands of small businesses across the country, bearing the cost of complying with all this just isn’t possible.

The Marketplace Fairness Act would affect the retail industry almost exclusively. Opponents point to the mind-boggling complexities that would be involved in implementing it – the learning curve and the investment in time, staff and probably software. And not surprisingly, many are predicting that small businesses would have to curtail spending in other areas just to meet the requirements of the bill.

So does anyone think this bill is a good idea? Actually, we found someone who does: Dan Crippen, executive director of the National Governors Association (NGA). In a guest post on 21st Century Retail’s blog, Crippen writes that states, businesses and consumers would all benefit from the Marketplace Fairness Act. He believes that this would not only allow states to level the playing field between Main Street retailers and online sells but would greatly improve revenue collections. Crippen says that annually, states fail to collect more than $20 billion from online and catalog transactions. Crippen also believes the bill would benefit consumers by increasing competition among retailers.

It’s anybody’s guess where this will end up. At a minimum, many are lobbying for raising the exemption threshold and even changing the SBA’s definition of small business to allow for more of a case-by-case consideration. But in the meantime, professionals agree that if you’re involved in e-commerce, it’s probably a good idea to prepare for this change in the tax law. Carla Yrjanson, vice president of tax research and content for indirect tax at Thomson Reuters offers some insights on Accounting Today and encourages businesses to determine their exposure should this law take effect. She also points out various software options available today, as well as additional options that may be on the horizon.
Image courtesy of sixninepixels /
Have you taken any steps to prepare your online business in case the bill becomes law?