What Does Your Small Business Need To Know About The Marketplace Fairness Act
My apologies once again to my international readers for this US-centric post but here in the US the Senate recently passed the Marketplace Fairness Act which could have significant impact on businesses who do business online. So what do you need to know about it?
The Marketplace Fairness Act of 2013 is not yet written into law but it was passed this past week by the Senate in a 75 – 24 vote. The main crux of the bill is to make up the estimated $20Billion that has been lost in local and state sales tax due to consumers making purchases online.
Up until now, the only time an online retailer had to charge sales tax to customers was if that customer lived in a state in which the company had a physical presence (corporate headquarters, fulfillment center, etc.). The crux of this bill will require online retailers to collect sales tax and report it to the correct local and state entities from all customers regardless of whether or not the company actually have a physical presence in that state.
The Good News
If you sell online this may make your heart stop but for 99.9% of you the Marketplace Fairness Act won’t impact you. Under the current version of the bill, only businesses who make more than $1M in annual sales would be required to collect sales tax for all states.
It is important to note though that the $1M figure is for ALL sales, not strictly internet sales, so if, when you combine your in-person retail, online retail, and wholesale sales, your business is nearing the $1M mark then you may want to take a closer look at this bill and, should it pass (as it’s expected t0), talk to an accountant about the tax implications.