We think the Main Street Fairness Act H.R. 5660 has a number of strong points – it would modernize existing laws, promote a streamlined approach to tax collection, return billions of dollars to state revenues and put all businesses (local and remote) on equal footing. One more important point that has been overlooked is that it supports consumer privacy. The Main Street Fairness Act will eliminate the need for states to enact burdensome and privacy encroaching reporting laws to enforce sales tax collection. States have already started requiring online merchants to report on consumers’ purchases – notably North Carolina and Colorado. Attached is a Press Release from FedTax.net that explains this point of view. We also have an online Petition that lets people express their support for all of the benefits of HR 5660.
Petition Announced in Support of Bill that Helps Protect Consumer Privacy
September 2, 2010
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Who Benefits from Local Services?
August 20, 2010This blog post on Internet Retailer.com titled The Great E-Retail Sales Tax Debate presents a thoughtful look at whether and when the sales tax loophole for web businesses will close. The answers, according to the writer (Jack Love, President, CEO Internet Retailer), are ‘Yes”‘ and ‘Soon’, but he has a few issues with the Main Street Fairness Act’s approach to the problem. His arguments, and our FedTax.net responses are as follows:
1. Since local brick and mortar stores benefit from police protection, fire protection, roads etc. — but web retailers do not — web retailers should not bear the full cost of local tax.
We believe that sales tax, from a policy point of view, is meant to tax consumption by residents and use those funds for a variety of local initiatives, including not just fire, police and roads, but also parks, hospitals etc. Also, the local services used by local businesses is much smaller than the usage by the residents of the communities themselves.
2. Requiring web merchants to calculate and collect state and local sales tax would be a tremendous burden.
If you follow our FedTax.net blog, you know our answer to this objection – Not True! We have designed and built our TaxCloud service to comply with the Streamlined Sales and Use Tax Agreement (endorsed by 45 states). TaxCloud is easy for web merchants of any size to implement and operate. And, we offer TaxCloud free to merchants.
3. Imposing a federal excise tax on e-commerce would be a better solution.
We believe that the interstate commerce laws prohibit this kind of solution, and that the state-based approach advocated by MSFA and SSUTA is a much more reasonable and workable approach. Also, regardless of whether this is a good idea, it is not pending in Congress and would take a long time to pass — if the issues of interstate commerce could even be resolved. The Main Street Fairness Act is real, it is in front of Congress now and it has the backing of legislators, state government officials and a long list of retailer organizations including the National Retail Federation and the Retail Industry Leaders Association.
We look forward to more discussion on this article!
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Blog Response: PC Mag’s Dvorak is wrong.
August 16, 2010We couldn’t agree more with this response to PC Mag’s editorial blog post last week. American Programmers Independent wrote this brief commentary response to John C. Dvorak’s mis-characterization of HR 5660.
We too have been longtime fans of Mr. Dvorak’s work, and were disappointed by his clear lack of understanding (or even any basic attempt at understanding) this matter. As an editorial, we understand and respect that it is merely his opinion, but we expect more journalistic integrity from the Ziff Davis editorial board.
Our attempts at outreach to Mr. Dvorak and PC Magazine since this editorial was published have not been responded to.
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Systemax CEO: Online Sales Tax Collection is Imminent
August 10, 2010According to this article at Multichannelmerchant.com, Systemax CEO-technology products group Gilbert Fiorentino announced during a session at eTail East in Baltimore that “States are under pressure to raise their revenues, and with e-commerce sales rising, they are seeing these revenues go out of state,” Fiorentino said. “I don’t see the states ignoring it for a long time. Sales tax has become an issue for everyone, and in the near future we’ll all be collecting.”
Systemax owns TigerDirect.com, CircuitCity.com and CompUSA (which has retail locations), so Mr. Fiorentino has a perspective on both sides of the sales tax collection discussion.
if you are at the eTail East conference, look for FedTax.net’s VP Sales, Carl Stefanelli. He would be happy to explain how our TaxCloud service makes sales tax collection and remittance a breeze for internet merchants of any size.
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San Francisco Chronicle: “Time to collect state tax on Internet sales”
August 3, 2010There is a good article in the San Francisco Chronicle today by Bill Dombrowski, the CEO of the California Retailers Association.
The article does a nice job outlining the need to change the current state of affairs related to internet retailers refusing to collect local sales taxes, while all other retailer are required to do so.
Oddly, the article does not mention the Main Street Fairness Act (HR 5660) now before congress – an omission which can only be related to printed page layout constraints. We commented to add this important detail for the readers of the Chronicle. Naturally, we also pointed out that TaxCloud can now calculate the accurate local sales tax for every jurisdiction in the country — for free!
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Internet Retailer Article 8/1/10 “Tax Attack”
August 2, 2010Despite the scary headline, this Internet Retailer Article by Paul Demery does a good job of analyzing the sales tax environment, providing a lot of factual information and commentary from all sides of the issue. FedTax.net CEO David Campbell is quoted in the article which points out that TaxCloud is designed to be extremely easy and efficient for web retailers to use – and that it is completely free for merchants.
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The Times Leader: “States eye online retail for tax revenue”
August 1, 2010Mike Zapler, a writer for the San Jose Mercury News, wrote a good summary piece, “States eye online retail for tax revenue” which appeared in The Times Leader (a Wilkes-Barre Pennsylvania newspaper). We have not seen the article run in the Mercury News yet, but we will certainly be watching for it.
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Response: LA Times Article “Plugging the Web tax loophole”
July 27, 2010http://www.latimes.com/news/opinion/editorials/la-ed-nettax-20100726,0,1649969.story
Yesterday’s Editorial in the LA times made a strong case for the provisions of the Main Street Fairness Act, notably that this is not a new tax (as opponents are spinning it). Rather that tax laws have not kept up with the changing sales environment. The editorial correctly notes that the Supreme Court rulings often referenced as opposing collection of sales tax by remote sellers (Quill, Bellas Hess) actually pre-date the Web itself. It also notes that arguments which fall back on the existence of ‘use taxes’ — the longstanding requirement that individuals report and remit the equivalent of sales tax on their own – are not productive and that the problem could be better solved at the retailer level.
The impact to states of a change in law is signficant. According to a study cited by the National Conference of State Legislatures, by failing to collect that tax California alone will lose over $3.3 billion in 2010. A link to that study is below. The efforts of the Streamlined sales tax project combined with passage of the Main Street Fairness Act will give states the opportunity to collect these taxes and distribute them to local communities, as determined by local law. TaxCloud proves that technology is indeed up to the task – and it is available at no cost to the merchants themselves.
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News: Internet Retailer reports on TaxCloud
July 16, 2010Have you seen it yet?
Paul Demery, Managing Editor of Internet Retailer just wrote about TaxCloud – Check it out!
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Forbes: eBay Sellers Shirk Sales Tax Law
July 15, 2010Just an FYI, if you haven’t seen it already, you need to read this article by Janet Novack of Forbes.
It describes a study “Do eBay Sellers Comply With State Sales Taxes?” just published in the National Tax Journal (a quarterly publication only available to National Tax Association members).
The study monitored 21,000 eBay listings posted by 7,000 sellers with 9,300 buyers over a 24 hour span and saw $755,905 worth of consumer electronics sold, but only $60,249 of those sales were made between a seller and buyer in the same state. The study goes on to note that only 18% of sellers bothered collect sales tax at all (in-state or otherwise).
eBay may be a little concerned, which may explain why they are opposing the Main Street Fairness Act so forcefully. eBay has taken a position in the press that the requirements of the Main Street Fairness Act would impose a crushing burden on small businesses. This is very surprising coming from a company whose business model is to provide turnkey services that enable anyone to operate a storefront with very little effort. It is hard to believe that sales tax calculation is beyond the ability of eBay to provide.
Naturally, we would be happy to help eBay easily bring their sellers into compliance with all local sales tax laws, at absolutely zero cost to eBay or eBay’s sellers.
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Response: Time Magazine Cover Story – The Broken States of America
June 30, 2010
I trust you have already seen and read the cover story of Time magazine this week, but if you haven’t, check it out now.
The article does a masterful job of describing the current financial crisis in most states. It even details how the states have not seen such financial calamity since the Great Depression. Strangely, though, the article does not address the action states took after the Great Depression to ensure such a situation would never happen again. Since you are reading our blog, you probably already know what they did: They created the sales and use tax system.
Their goal at the time rings true to this day, more than 70 years later. The purpose of the sales and use tax paradigm was to have a more progressive, consumption-based system of taxation. After establishing sales and use tax as a way to finance local services, many localities were able to fund up to 40% of their annual budgets through the collection of sales taxes. Unfortunately, the brightest minds of the 1930s could never have imagined a marketplace of the scale and ubiquity of the internet. As shoppers have migrated online, largely for convenience, the practice of collecting local sales taxes at the time of the transaction has not migrated with them. And now that the internet marketplace is maturing, local governments have seen proceeds from sales taxes drop to approximately 16% of their annual budgets—hardly a coincidence.
Most internet merchants do not collect local sales taxes because the Supreme Court, in 1967 (Bellas Hess) and again in 1992 (Quill), ruled that it would be too difficult for a “remote seller” (mail-order catalogs at the time) to calculate and remit local sales taxes for the thousands of tax jurisdictions in the country. In these rulings, the court did point out that one day technology would likely solve this problem, but even then, they said, only an act of Congress could grant states the authority to compel out-of-state merchants to collect sales tax (just as bricks-and-mortar merchants are required to do). Today, many internet merchants rely upon the Quill ruling to justify their non-collection of sales taxes. (Ironically, the Quill Corporation, which litigated this matter against North Dakota all the way to the US Supreme Court in 1992, now collects sales taxes on all their internet sales—even in states where Quill Corp. has no physical presence.)
Hopefully a few of our legislators in Washington, DC, will read the Time magazine article and agree with us that the time has come for federal legislation requiring out-of-state merchants to collect local sales taxes. It is time to introduce (and pass) the Main Street Fairness Act. The Main Street Fairness Act does not contemplate or suggest any new taxes; it simply allows states to require merchants to collect sales tax at the time of a transaction, instead of relying upon the consumer to report and pay these taxes later.
Regarding the Supreme Court opinion that collecting sales tax is too difficult for remote sellers: Our TaxCloud service launches tomorrow! TaxCloud manages local sales tax calculation for every jurisdiction in the United States. In the 23 (soon 24) states that conform to the Streamlined Sales and Use Tax Agreement, TaxCloud also manages collection, remittance, and sales tax returns for all TaxCloud registered merchants—all for free.
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All aboard!?
June 30, 2010Originally posted 1/22/2010 – Last UPDATED 6/30/2010 – Wow, there has been a lot of activity in individual States over the last few weeks after the State of New York reported generating $53 million in new sales and use tax revenue from the 30 companies ensnared by their Complex Nexus legislation (often referred to as the “Amazon” Tax – as we have written about before). While Rhode Island and North Carolina passed similar legislation last year, they have not reported how successful their efforts have been. Amazon.com ceased all affiliate operations in RI & NC based upon their adoption of these laws. Amazon has not ceased affiliate operations in New York, but has been engaged in an ugly court battle to challenging the validity and constitutionality of the law. California and Hawaii also considered (but did not pass) similar legislation late last year.
41 States have already identified significant budget shortfalls, projecting the worst budget shortfall ever! Our friends at The Center on Budget and Policy Priorities just released a detailed (and terrifying) report outlining a projected $194 billion deficit for 2010, and another $180 billion deficit for 2011.
As of this writing four states five states (just added Vermont) seven states (just added Maryland & Illinois) eight states (added California) nine nineteen states (just added Connecticut) added a bunch more have considered some sort of sales (use) tax legislation:
| STATE | BILL | INTRODUCED | EFFECTIVE | TYPE | SUMMARY | STATUS |
| ALL (FEDERAL LEGISLATION) | HR5660 | 7/1/10 | Main Street Fairness Act | Gives states the right to require remote sellers to collect sales tax. States must be members of the Streamlined Sales and Use Tax Agreement. | Introduced into Congress by Rep. Delahunt (D-MA). Has supporters from both the Democratic and Republican parties, as well as support from states. | |
| Arkansas | Entity Isolation | Existing legislation prohibits merchants from practicing entity isolation (i.e. claiming that web operations and store operations are unrelated). | Entity isolation legislation in effect. | |||
| California | Entity Isolation
Notification |
Existing legislation prohibits merchants from practicing entity isolation (i.e. claiming that web operations and store operations are unrelated).
Separate legislation has been considered to require merchants notify CA purchasers during checkout that they may owe Use tax. |
Entity isolation legislation in effect. The proposed new legislation on Notification passed the Senate 2/18/10 but failed to make it into final budget package. | |||
| Colorado | HB1193 | 1/20/10 | 1/1/10 | Notification
Reporting |
Requires online retailers to provide CO purchasers with a summary warning on web site and invoices and requires retailers to report this information to the state annually. Also requires retailers with over $1 mill annual sales to send a 1099-type notice to the customer. Retailers can avoid these requirements by collecting the sales tax. | Signed into law 2/24/10. Affiliate Marketing rules were considered but not included in the final law. |
| Connecticut | RB5481 | 3/8/10 | Affiliate Marketing ($2,000 threshold) | Died in Committee 5/5/10 | ||
| Florida | SB2552 | Other | Proposes FL allocates money to build software requiring credit card companies to collect sales tax. | Unlikely to pass. | ||
| Georgia | SB512 | 3/17/10 | Contingency Fees | Authorized GA to pay contingency fees to lawyers to sue retailers to enforce collection obligations. | Passed Senate 3/26/10 | |
| Illinois | SB3353 | Affiliate Marketing ($10,000 threshold) | Bill ‘held over’. | |||
| Indiana | Entity isolation | Existing legislation prohibits merchants from practicing entity isolation (i.e. claiming that web operations and store operations are unrelated). | Entity isolation legislation in effect. | |||
| Iowa | HF2510 | 3/1/10 | Affiliate Marketing | Died in Committee 3/2/10. | ||
| Maryland | SB824 | Died in Committee before the end of the 2010 legislative session. | ||||
| Mississippi | SB2927 | 1/20/10 | Affiliate Marketing ($0 threshold) | Died in Committee 2/2/10 | ||
| New Mexico | HB50 | 1/15/10 | Affiliate Marketing ($10,000 threshold) | Died in Committee 5/3/10 | ||
| New York | 6/1/08 | Affiliate Marketing ($10,000 threshold) | NY reported that it generated $53 million in new use tax from the 30 companies affected by its Affiliate Marketing law. | Signed into law April 2008 | ||
| North Carolina | 4/23/10 | Affiliate Marketing | Signed into law in 8/5/09. | |||
| Oklahoma | HB2359 | 1/5/10 | 7/1/10 | Notification | Requires retailers to post a notice to OK residents on the checkout page that they may be liable for use tax, and to disclose this on the invoice. | Signed into law 5/28/10. |
| Rhode Island | 7/1/2009 | Affiliate Marketing ($5,000 threshold) | Signed into law 6/30/09 | |||
| Tennessee | SB1741, HB1947 | 3/19/09 | Affiliate Marketing
Notification |
Died in Committee 4/20/10 | ||
| Vermont | HB661 | 1/29/10 | Affiliate Marketing ($10,000 threshold) | Died in Committee. | ||
| Virginia | SB660 | 1/21/10 | Affiliate Marketing ($10,000 threshold) | Died in House subcommittee 2/24/10 |
Please Note: The information provided on this web site is intended to stimulate discussion about sales tax issues affecting online merchants. While we make every effort to provide accurate information, readers should refer to their own tax counsel, state and local laws and other source documents for more detail.
All of this activity at the state level should provide ample indication to our Senators and Representatives in Washington D.C. that federal action is necessary to prevent a flood of varied state-by-state laws. Urge your Senators and Representatives to ask around on the hill, and find out what is holding up introduction (and passage) the the Main Street Fairness Act!
Here at Fed-Tax.net we are eager to help all Internet merchants easily and automatically calculate and remit correct local sales tax for every jurisdiction in the United States – at zero cost to merchants. We will do this regardless of which system ultimately prevails, state-by-state affiliate taxes, or a federally authorized Streamlined Sales and Use Tax Agreement.
Our TaxCloud service will launch later this year (watch here for our preview release announcement soon), and will demonstrate beyond any shadow of doubt that it is no longer overly burdensome (technically or financially) for remote sellers to comply with all local sales tax laws. We are building TaxCloud to activate the opinion of the Court as originally penned by Justice Stewart in 1967 (and re-affirmed in 1992) which invited congress to act once “the skill of contemporary man and his machines” has solved this problem.
UPDATE – COLORADO SB 1193 2/2/2010: Last night the Colorado House of Representatives voted (on “Shall the bill pass?”) 33 (Yes) to 32 (No). So, they PASSED SB 1193 – Here is the Current (Amended) Bill now on its way through the Colorado Senate.
UPDATE – VERMONT HB 661 Introduced 2/3/2010: Just saw that Vermont also introduced their own version of an affiliate tax late last week. Sorry we missed it.
UPDATE – Colorado SB 1193 Revised 2/8/2010 – the Colorado Senate has revised SB 1193 significantly.
UPDATE – Maryland SB 824 Introduced 2/10/2010
UPDATE – Illinois SB 3353 Introduced 2/10/2010
UPDATE – California Senate passes AB 8 2/18/2010
UPDATE – Colorado SB 1193 is now LAW – The Governor of the State of Colorado – see Emergency Regulation 39-21-112.3.5.
UPDATE OKLAHOMA HB2359 is now LAW. It requires retailers to post a notice to OK residents on the checkout page that they may be liable for use tax, and to disclose that information on any invoice sent to the customer.
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Fed-Tax.net Names Beatrice Vaccaro to Lead Sales and Marketing
June 17, 2010MasterCard E-Commerce Executive Joins Technology Start-up
Seattle, Washington – June 17, 2010 – Fed-Tax.net, a company that is preparing to launch web-accessible services to allow merchants to quickly and precisely determine the correct amount of local sales tax due for any transaction, today announced the appointment of Beatrice Vaccaro as Executive Vice President of Sales and Marketing. Ms. Vaccaro brings more than 25 years of experience to the role.
“Beatrice is a fabulous addition to our team,” said R. David L. Campbell, Chief Executive Officer. “In addition to her extensive marketing background, she has significant experience with e-commerce and emerging technologies. In her most recent role she worked closely with internet retailers across the U.S. to roll out MasterCard’s Secure Code protocol. This experience is directly applicable to our efforts toward the upcoming launch of our TaxCloud service. After an extensive nationwide search, we ultimately selected Beatrice based upon her immediately relevant tactical and strategic experience. We are honored she has accepted the position, and we look forward to working with her to modernize the sales tax subsystems for every e-commerce and point-of-sale system in the country.”
Previously, Ms. Vaccaro was Vice President of E-Commerce and Emerging Technology for MasterCard International. She was part of a team responsible for new product and strategic alliance development in e-commerce. Ms. Vaccaro also worked for MasterCard in communications and product development positions. Prior to joining MasterCard, she managed marketing programs at American Express, Avis Inc., and People’s United Bank. She received her B.S. in economics from the Wharton School of the University of Pennsylvania and her M.B.A. in marketing from New York University.
About Fed-Tax.net
The Federal Tax Authority (Fed-Tax.net) is a private company organized to enable fair and true sales tax neutrality, ensuring a “level playing field” for local businesses and remote sellers alike while simultaneously stimulating local municipalities with additional tax revenues. The company has designed a free, turnkey service that enables e-commerce retailers to easily calculate and remit voter-approved local sales taxes, as required to comply with state and local law. The service precisely determines the correct amount of sales tax due for any transaction (including state, county, city, and localized taxes). It can be easily integrated with virtually any accounting or e-commerce shopping cart system.
The company is headquartered in Seattle, Washington, and has a sales office in Stamford, Connecticut. For more information on Fed-Tax.net, please visit http://fed-tax.net or e-mail service@fed-tax.net.
For additional information please contact:
Erin Granville
The Federal Tax Authority (Fed-Tax.net)
egranville@fed-tax.net
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Response: “Tax and spend: Streamlining effort could raise revenues, but at the cost of jobs” on AugustaFreePress.com
June 15, 2010There’s a great article on AugustaFreePress.com about the effect of the Streamlined Sales and Use Tax Agreement on small businesses. We responded with some thoughts, particularly on how excited we are about our upcoming launch of TaxCloud which will directly affect the conversation.
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GA going Streamlined!
May 28, 2010UPDATE – 5/28/2010 – Georgia’s Governor Sonny Perdue signed the Streamlined Legislation! The bill is now law, taking effect January 1, 2011!
UPDATE – 4/30/2010 – Georgia’s Senate approves Streamlined Legislation! The bill is now sitting on Governor Perdue’s desk for signature. Georgia, you’re on our minds now 
No, we are not speaking about Grammy Award winning pop sensation Lady GaGa. Rather, we are of course speaking about the State of Georgia (the “Wisdom, Justice and Moderation” state).
Last Friday, Georgia’s House of Representatives passed HB 1221 (introduced 2/18/2010) adopting legislative amendments to allow Georgia to become a full Member State under the Streamlined Sales and Use Tax Agreement. This bill has now been introduced to the Georgia Senate and been assigned for consideration by that legislative body’s Finance Committee – we are trying to determine if there is a hearing scheduled, and if so when.
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