Last week, the US Senate passed the Marketplace Fairness Act. If it passes the House, the bill would require all businesses to collect state sales tax for online purchases. Since 1992, businesses have only been required to collect sales tax in states where they had a store or warehouse. Currently, 46 states collect sales tax and it is estimated those states lost out on $26 billion in uncollected revenue in 2012.
Proponents of the bill include large retailers, such as Target or Wal-Mart, who argue they have to charge 5-10% higher prices than smaller online retailers. Small businesses currently are not required to pay state sales tax where they don’t have a brick and mortar building. Small businesses owners feel the law will make it harder to compete with big companies, because they will have to increase their product prices in order to cover the sales taxes. Also, the new requirements could leave businesses open to be audited by 46 different states.
So, would an increase in online prices really hinder your customers’ shopping habits? Is having $0 sales tax part of your online marketing strategy? Perhaps not. Think about it: If price is a customer’s biggest concern, then why do most people not balk at paying shipping and handling fees? In fact, a 2007 Nielsen study found that 81% of people shop online because they can do it any time of day, not because of lower costs. The study also found people buy online to comparison shop, and because they can find things more easily.
Those opposed to the law are also speaking their mind on social media, with the hashtag “#NoNetTax” trending in the past week. Are you one of the voices speaking out against the bill? How will your small business be affected if the House passes the Marketplace Fairness Act? Would you consider lowering your annual sales to less than $1 million in order to be exempt? Or, will you look for ways to increase sales to cover the costs?
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