As a small business owner with significant experience in both online and offline sales, I can say that arguments about the Marketplace Fairness Act (MFA) being overly burdensome for small businesses are flat-out wrong.
My company, P&E Distributors, is a family-owned, wholesale distributor of performance racing parts and automobile accessories. We’ve been in business for more than a half-century. Today, we sell both online and in a traditional retail setting. Of our more than $3 million in annual sales, a little over half are from Internet sales, 98% through eBay. I know what I’m talking about when it comes to online sales taxes.
While some opponents of the MFA claim to know how small, online businesses will be affected by the legislation, they fail to recognize that the status quo is truly unfair to brick-and-mortar businesses and local communities.
Under current law, many online retailers sell products without collecting sales taxes, even though sales taxes are due. Depending on the jurisdiction, this can mean a pricing advantage for those businesses of up to 10% over local retailers. As anyone who has worked in retail will tell you, a pricing advantage of that magnitude can be the difference between success and failure. That’s why many online retailers are fighting so hard to preserve the outdated system.
The government is picking winners and losers in the retail marketplace by giving online companies what is in effect a government subsidy. As a result, traditional stores are losing customers, and communities are losing jobs and economic activity. Main Street retailers are not opposed to competing with online retailers; we just don’t think the government should give them a 10% advantage out of the gate.
Of course, compliance costs are a major consideration. The MFA requires states to simplify their sales tax systems for online collection, and the software the bill promotes will be easy to use and effective. The legislation also protects those retailers who use the state-provided software from audits. In fact, small business owners who sell on Main Street are far more likely to be audited under current laws than online retailers will be under the MFA.
My own experience with this type of software has been positive. Our software, ULT Plus by Activant, displays the sales tax rate for any given customer based on the customer’s zip code, allowing for pinpoint accuracy for sales tax collection. Given that online businesses require the use of software to tackle problems vastly more complex than figuring out sales tax, it is puzzling why some who have spoken out against the MFA claim to have little faith in the power of technology.
Another important thing the Marketplace Fairness Act does is protect truly small online businesses: any retailer with less than $1 million in online, out-of-state sales per year — regardless of their revenue from in-state or brick-and-mortar sales — will not be subject to sales tax collection. A business, like mine, that is making more than $1 million per year from out-of-state sales can afford to comply with sales tax laws.
MFA opponents have said it would be unfair to ask their businesses to do what mom-and-pop businesses have always had to do — collect sales tax. Yet they fail to mention basic fairness for Main Street businesses, or our communities. I’m not a fan of taxes, but I am a fan of fairness — and true fairness means existing laws should be applied equitably to all businesses and consumers, whether purchases are made in a brick-and-mortar store or through a website.
That’s why so many small business owners support the Marketplace Fairness Act. We believe in fairness for Main Street businesses and the communities they support.
Donnie Eatherly is the president and co-owner of Performance & Electronics Distributors, Inc., and a member of the Alliance for Main Street Fairness’ Small Business Advisory Board.