The Marketplace Fairness Act (MFA). It’s back in the news lately. You’ve heard of it so I’m not going to spend much time interpreting the bill. That’s been done by a million other sources. I will say that there’s not enough focus on the right issue.
States need more revenue. I get it. I live in California. But the hard truth is that even though states want more money they make it almost impossible for online sellers to pay it. Sounds crazy, right? But it’s true. States make it extremely difficult to comply (more on that later), leaving business owners beyond frustrated, wasting hours and hours every month filing and paying sales tax to states. I talk to online sellers all the time. Not one of them says they have sales tax all figured out. And this is without the MFA, which will force more online sellers to further wade into the morass.
Compliance complexity is the real issue
I’ve called the Arizona Department of Revenue myself more than once to get a ruling for TaxJar customers about nexus. Each time I called, I got a different response. What’s worse, my customers all get different responses. How are business owners supposed to comply if the states won’t help them? While we’re talking about Arizona, it requires seller registration at both the state and local level. Sellers have to pay $50 per year for a seller license with the city of Phoenix. And, they have to file a separate sales tax return to just that city. Are you confused? Now you know what it’s like being an online seller. (note: AZ may be headed in the right direction).
Don’t go anywhere, I have more examples. Ask the state of Virginia to rule on a nexus issue in writing so you can have it in case they audit you. They’ll charge you $500 to hear your case. Or check out what the Tennessee Department of Revenue puts at the bottom of their correspondence to sellers:
Any opinion from tax law or regulations given herein is believed to be a correct interpretation. However, the opinions cannot constitute a revenue or letter ruling pursuant to the provisions of Tenn. Code Ann. Sect. 67-1-109.
If the states can’t give you the simple answers you need to be able to run your business legally, who will?
Is software the savior?
A lot of folks in favor of the bill say that software will serve as a magic wand and solve everything. As someone who works with web-based software, shopping carts, and the state and federal government, my view is that software may very well help online sellers figure out how much sales tax to collect from their customers. The issue I have is that assumes a business has the capacity to implement whatever software the states provide online sellers for their existing ecommerce systems. In my experience, most online sellers will not have this capacity. It will not be simple.
It sure feels like simplifying sales tax laws is a good place to start. If we could do away with all of the hassles of trying to figure out rates and nexus, compliance will go through the roof. I can’t tell you how many sellers I talk to who’ve decided they will take the risk and do nothing about sales tax compliance because it’s just too hard. Simplification will give the states what they want – added revenue. Everyone will be happy.
As a guy trying to grow his business I should be begging for the MFA to pass. It will no doubt add a whole new layer of complexity to an already chaotic landscape. And you know what? TaxJar will probably make a ton of money because of it. That’s not what my team is all about. We know that this sucks. We hate hearing the stories that our customers tell us all the time. TaxJar will do fine, thank you, even if somehow the complexity of sales tax improves. There’s plenty of opportunity for us to help the online seller just trying to do the right thing.
Thoughts? Share them with me in the discussion section below.