Eliminating the costs associated with online sales tax

July 25, 2013
TaxCloud

TaxCloud: Sales Tax at the Speed of Commerce

One of the most frequent concerns we hear from online retailers about collecting sales tax is that it will simply be too costly. We’ve heard estimates that range up to $400,000 per year—which is insane. We don’t think that anyone should have to spend that kind of money simply to collect sales tax.

In fact, we don’t think that anyone should have to spend money to collect sales tax, full stop. That’s why we created TaxCloud, to give online retailers a free way to manage sales tax. Instead of charging to use TaxCloud, we receive a commission from states based on the amount of sales tax we help retailers collect.

That’s also why the Marketplace Fairness Act requires states to provide free sales tax software for retailers.

But even with the promise of free sales tax software and services, concerns about costs remain. Nothing is really free, the argument goes; there must be hidden costs somewhere.

So let’s look at the most common arguments we hear on why collecting sales tax online would be too expensive.

Keep in mind, we can only speak to how TaxCloud works, so all the information here pertains to TaxCloud and not to any other sales tax management software or service.

Training employees to use sales tax software is costly and time-consuming. TaxCloud was designed to be easy for anyone to use. From registration to going live takes as little twenty minutes. What’s more, once TaxCloud is activated for a store, there’s next to no upkeep. If we’re filing the store’s sales tax returns, we ask that they review their returns once a month. Other than that, retailers don’t need to think about it—they can just set it up and forget it. There’s no training involved, and anyone who can manage an online store won’t have any trouble using TaxCloud.

Necessary software upgrades cost money. Because TaxCloud is a real-time web service, not software that’s uploaded or downloaded, there are no upgrades. Tax rates are updated and new features are added behind the scenes, so retailers see those results automatically, without doing anything extra. And as always, there’s no charge for the service at all.

It’s too expensive to hire developers to set up software to work with existing systems. TaxCloud is integrated directly with the e-commerce platforms that most online retailers use to run their shops. That means that our developers work with the platform’s developers to make TaxCloud available to users. Retailers using e-commerce platforms that are integrated with TaxCloud don’t need to hire their own developers. If your e-commerce platform doesn’t support TaxCloud yet, then call them and ask when TaxCloud will be available—TaxCloud is free for platforms as well.

We’d have to hire an accounting staff just to keep track of everything. This is the beauty of sales tax management services: It’s all automated. There’s no need to calculate anything, or look up sales tax rates, or fill out sales tax returns, or even write a check to remit the sales tax that’s been collected. TaxCloud handles all of that.

We completely agree that there shouldn’t be any compliance costs associated with online sales tax, and we’ve worked hard to create a free service that handles every aspect of sales tax for retailers. Cost simply shouldn’t be a factor, and with TaxCloud, it isn’t.


How sales tax management services handle audits

July 8, 2013

Congress is currently considering legislation to allow states to require online retailers to collect sales taxes. The bill that was passed by the Senate in May, the Marketplace Fairness Act, has raised concerns about how it could affect the way businesses are audited.

At TaxCloud, we handle not only sales tax calculation and collection but also filing and audits for many of our merchants. While we don’t know exactly what future legislation may say about audits, here’s what our experience dealing with audits has been like.

First, a little background: The 24 states that have designated us a Certified Service Provider (CSP) have agreed not to hold our merchants liable for any tax calculation errors, and in the event of an audit, these states deal first and primarily with us, not the business itself. So how does this work?

When one of our merchants is audited, the state begins by contacting us. We act as the intermediary between the state and the merchant. The state lets us know that it will be reviewing the merchant’s transactions and conducting an audit beginning on a particular date, and we in turn notify the seller.

The merchant doesn’t need to provide any additional information at this point, as long as we have complete transaction data. If there is transaction data that we don’t have, the merchant needs to supply it.

During the audit, the state sends any information or document requests directly to us. Occasionally we may need the seller’s help to respond. For instance, if an item was classified as tax-exempt but it’s not clear in the transaction records exactly what the item is, we’d ask the seller to provide a description of the item. The state contacts the merchant directly only if there is evidence of fraud.

If future legislation follows this pattern for audits, it’s good news for businesses: It means that states will go to sales tax management services for data that businesses have traditionally had to supply, so businesses won’t be faced with hosting an audit.


Why the number of sales tax jurisdictions doesn’t matter

April 1, 2013

Illustration by Cory Thoman - http://clipartof.com/1087428

So what does all that mean?

First, let’s be clear: It would never mean a sales tax return or an audit for each jurisdiction. The Marketplace Fairness Act says that there has to be just one central authority in each state that handles sales tax returns and audits. So no matter how many tax jurisdictions are in a state, there’s just one return to file, and if a retailer is audited, there’s just one audit from the state. And retailers who use state-certified sales tax management services don’t need to worry about audits in general—but more on that in a moment.

So what about sales tax rates, which can vary by jurisdiction?

The good news there is that the Marketplace Fairness Act requires states to provide sales tax management software or services (such as TaxCloud) for free. These programs check and update rates and product definitions for every tax jurisdiction, and it all happens behind the scenes, so sellers don’t need to worry it.

In the end, for online sellers, collecting sales tax is much like handling shipping. There’s a program or service to set up with the online store, and then the program handles everything—no matter how many tax jurisdictions there are.

Back to audits: When retailers use sales tax management programs from state-approved Certified Service Providers (CSPs), they never have to host an audit. The CSP deals with the state instead, so the retailer doesn’t need to worry about dealing with state officials and coming up with transaction records.

Rates, audits, returns, the number of tax jurisdictions—with sales tax management services, retailers don’t need to worry about any of them. It’s all taken care of.


Debunking 3 myths about internet sales tax

March 8, 2013

The reintroduction of the Marketplace Fairness Act has resulted in the reintroduction of myths and half truths about its impact on businesses. In this post, we counter the three main fears about collecting internet sales tax.

Fear: Collecting sales tax is too difficult.

Some point to the fact that, nationwide, there are over 9,600 tax jurisdictions, and they argue that online sales tax collection would be so difficult that online retailers would have to hire additional staff to handle it.

Fact: Fortunately, technology provides an easy answer. Sales tax rates are easily stored and maintained in a database—it doesn’t matter if there is 1 rate or 100,000. Databases easily handle tax exemptions, too, for every location. Everything needed to figure out the correct tax rate is already present during an online sale: the purchaser’s address, the sales price, and the type of item being purchased.

Sales tax management services, which offer retailers an easy way to manage sales tax, have already been integrated with most e-commerce platforms, so starting to collect sales tax can be as easy as checking a box.

The proposed legislation is doing its part, too, to make collecting sales tax easy. It requires that states simplify their sale tax laws before online retailers start collecting, lets retailers file one sales tax return per state, and centralizes the registration process. It also requires states to make available free sales tax software for retailers that can work with all states.

So much for the concern over difficulty; what about cost? Sales tax management services are available at every price point—including free. So collecting sales tax doesn’t need to cost an online retailer anything.

And it’s also worth noting that most online retailers won’t have to collect sales tax at all. Only retailers with over $1 million in annual out-of-state sales will be affected.

Fear: This will give local stores an advantage over online stores.

Fact: Actually, it will correct an artificial advantage that online stores currently have, creating a more level playing field for all retailers.

Right now local stores have to collect sales tax while online stores don’t, which gives online stores the appearance of a price advantage of up to 10%. Even when bricks-and-mortar retailers also sell online, it doesn’t change the basic fact that in their local stores, they have to collect sales tax, while online stores don’t.

If the law doesn’t change to keep up with the way people shop, the logical conclusion is that many businesses will elect to only sell online—which would mean no local shopping. Picture your community without a bookstore, clothing store, or electronics store. That’s not what anyone wants.

Fear: This is a new tax.

Fact: If you live in a state with sales tax, you already owe sales tax on your online purchases. If the retailer doesn’t collect sales tax, the purchaser is supposed to pay the tax due directly to the state. In other words, this isn’t a taxation issue, it’s a collection issue.

Most people don’t know that they owe sales tax when they buy online, and states find it almost impossible to enforce their own sales tax laws online. That’s why the Marketplace Fairness Act is needed: to allow states to enforce their own laws and end the sales tax loophole that favors online retailers over local retailers.


Why don’t online retailers collect sales tax?

January 9, 2013

We’ve tackled the perennial question of why online retailers don’t have to collect sales tax in a guest blog post for Spree Commerce. Check it out!


TaxCloud in the news!

October 11, 2012

TaxCloudWe’re happy to report that TaxCloud and FedTax have been in the news quite a bit lately.

An end to the free online tax ride nears: In this ComputerWorld article, TaxCloud user Ken Knezek, owner of Bandals Southwest, talks about how his small company has handled online sales tax

What the end of tax-free online shopping means for small businesses: Our CEO, R. David L. Campbell, was interviewed for this Reuters article on how small businesses will be affected by online sales tax

How you can prepare to collect online sales tax: And in an article in Independent Retailer, David offers some tips for online retailers who are thinking about starting to collect sales tax

It’s great to see so much attention being paid to the practicalities of what online sales tax really means for online retailers. As we move closer to federal legislation on the issue, we hope to see more articles like these!


What wasn’t said at yesterday’s Senate hearing, but should have been: Free!

August 2, 2012

At yesterday’s Senate Commerce Committee hearing, numerous senators voiced their support for the Marketplace Fairness Act, which would close a loophole that allows online retailers to avoid collecting sales tax.

Several senators, among them Senator Lamar Alexander (R-TN), said that they were particularly concerned about states’ rights. Under the current system, states cannot enforce their own sales tax laws; the bill would allow states to decide if they want to require online retailers to collect sales tax from state residents. Others cited concerns about simple fairness: Local small businesses—particularly those that sell high-end goods such as cameras, jewelry, and electronics—often serve as showrooms for customers who then buy online to avoid paying sales tax. The inequity is hurting local small businesses across the country.

Opponents of the bill were primarily concerned with the costs and complexity of collection, saying that it would be too difficult and expensive for small online retailers. Several supporters responded that if the bill is passed, more sales tax management services will be created and the market will act to bring down costs.

Scott Peterson, Executive Director of the Streamlined Sales Tax Governing Board, testifies before the Senate Commerce Committee, and even shows off to the members of the committee how easy and accessible sales tax has become – that you can even do it on a common device, like this iPad (and yes, that’s TaxCloud).

Which brings us to what wasn’t said: The market has already acted. A completely free sales tax management service is available right now. TaxCloud calculates the sales tax due for any region of the county, collects and remits sales tax, files sales tax returns, creates detailed records of sales tax transactions for shop owners, and even provides indemnification and audit relief—in short, it resolves every concern raised by Senator Kelly Ayotte (R-NH). It does all this at absolutely no cost to the business.

It’s too bad that this wasn’t mentioned by any of the bill’s supporters, because it directly counters opponents’ primary objection to the bill. We don’t have to wait for the market to act to bring down the costs of collecting sales tax. That cost can range from zero to as much as a business wants to pay, depending on the service a business chooses—there are multiple options already on the market today, including Accurate Tax, ADP TaxWare, Avalara, CCH SpeedTax, Exactor, and TaxCloud. Importantly, a no-cost option is already available.

Overall, the hearing showed a great display of support from many senators—and, we were pleased to note, except for only a few instances (which we will resist detailing here), an atmosphere of professionalism, courtesy, and collegiality reigned, even among those who disagreed on the issues.

You can view a video of the hearing on the Senate Commerce Committee website.


Small business owners quoted by Alliance for Main Street Fairness — including our CEO

August 1, 2012

We were excited to see FedTax’s CEO, David Campbell, quoted alongside two other business owners in a press release from the Alliance for Main Street Fairness.

The article includes quotes from Pete Sides, co-owner of Robert M. Sides Family Music Center in Williamsport, PA, and Steve Bercu, co-owner of BookPeople in Austin, TX, both of whom support online sales tax collection—and whose small businesses both collect and remit sales tax, proving just how easy it is. Said Steve Bercu, who also testified in today’s hearing before the Senate Commerce Committee:

Remitting sales tax from out-of-state customers is not that hard, and those perpetuating the myth that it’s wildly complicated and costly are simply trying to preserve the special treatment in the tax code they currently enjoy. Congress should level the playing field and let us all compete on price in a free market.

We’re proud to be making online sales tax collection easier and cheaper (free) for businesses big and small. Here’s what our CEO had to say to the Alliance for Main Street Fairness:

Today, keeping track of a few thousand local tax rates and filing requirements is not an insurmountable technical, administrative or financial burden. TaxCloud proves this point by calculating and collecting sales tax on any purchase for any tax jurisdiction in the United States in less than one second. The service is free to all retailers.

It’s great to see business owners speaking up for marketplace fairness and recognizing the role that TaxCloud and other sales tax management services play in making the playing field level for everyone.

We will post again on our report from the hearing floor.


Our hearts are racing (for internet sales tax collection)!

July 26, 2012

As most of our readers are no doubt aware, changes have been happening fast for online sales tax collection. Here are the basics you need to know:

  • A few days ago, the House Judiciary Committee held a hearing on the Marketplace Equity Act (H.R. 3179). Several members of Congress, both Democrat and Republican, testified at the hearing in support of the bill, and an article in the Wall Street Journal proclaimed that “the hearing revealed that a large number of lawmakers had moved beyond the question of the legitimacy of collecting online sales taxes and were focused on how to avoid making the process overly burdensome.” (We have the answer, of course: services such as TaxCloud, which take the cost and complexity out of collecting sales tax online.)
  • Meanwhile, the Senate bill on the same issue, the Marketplace Fairness Act (S.1832), will be the subject of a hearing before the Senate Committee on Commerce, Science, and Transportation next week on August 1.
  • Also, New Jersey Governor Chris Christie has joined the list of Republican lawmakers who support federal online sales tax legislation. He also made a deal with Amazon for the company to begin collecting sales tax on purchases made by New Jersey residents in July 2013, in exchange for which the company will build two new distribution centers in the state. Since Christie is one of the leaders of the Republican party—he is frequently mentioned as a potential vice-presidential candidate—we hope this will put an end to the divisive rhetoric that only Democrats support online sales tax collection.
  • Another sign of the momentum that federal legislation is gathering, news articles on online sales tax collection are proliferating everywhere. A few we recommend:

Retailers, lawmakers revive call for Internet sales tax, MSNBC/CNBC, July 26

Online sales tax effort gains traction at US House hearing, Wall Street Journal, July 24

Proposed online sales tax gaining momentum and foes, FOXBusiness, July 24

Supporters of online sales tax say it’s good for consumers, PC World, July 24

Online sales tax is coming!Wall Street Journal, July 21

Pass the online sales tax! The Washington Post Editorial Board, July 16

Tax break nears end for online shoppersWall Street Journal, July 16 NOTE: FRONT PAGE

States, Congress rallying for an e-sales taxWashington Post, July 8 NOTE: FRONT PAGE

Our opinion: If the bipartisan momentum and support for online sales tax collection continues at the current pace, this issue could provoke a seemingly extraordinary achievement: that Congress can get something done, even in an election year!

This legislation is good for consumers, state and local governments, and businesses. Opponents (primarily eBay) claim the legislation will hurt businesses, but their argument ignores the actual substance of the proposed legislation. The Marketplace Fairness Act S.1832 (and the Marketplace Equity Act H.R.3179) require that states simplify and standardize their sales tax systems and they must provide the software (or services) for retailers to easily comply. We strongly support action by Congress on this issue.


We ♥ Senator Cardin – The most entertaining 108 seconds in online sales tax collection history

April 26, 2012

Yesterday we were in Washington DC to attend the Senate Finance Committee hearing we mentioned a few days ago. We would encourage everyone to watch the video of entire hearing, particularly Professor Walter Hellerstein’s outstanding testimony (time-code 47:50 to 52:47). But we are posting today to tell you about the very exciting portion of the hearing when Senator Cardin (D-MD) asked questions of the witnesses (time-code 84:41 to 91:32). Our regular readers will truly appreciate the last 108 seconds.

We have prepared this unofficial transcript of Senator Cardin’s questions from the video of the hearing.

Senator Cardin: Thank you Mr. Chairman, and let me thank the panelists. I want to talk about one of the major sources of revenues for our state, and that’s the sales and use tax.

Dr. Rubin, I want to focus on the fact of how much of those revenues are not being collected today. It’s been estimated as a result of out-of-state shipments, principally through the internet, that there’s eleven billion dollars ($11,000,000,000) a year not being collected. Now, I’ve got the Maryland number, and the Maryland number is thee hundred million ($300,000,000). Which is an interesting number because the governor is talking today about bringing the legislature back to a special session in May because of a three-hundred-million-dollar gap and is looking at increasing a lot of taxes in our state because we need three hundred million dollars to balance our budget. If we had this sales and use tax, we would have a balanced budget, and there would be no need to bring the legislature back into session.

Which brings me to the Marketplace Fairness Act – trying to establish a level playing field. You can go to a retail store in Maryland. Use your phone to take a photograph of the identification [of a product], then go on the internet and get that product shipped into Maryland and avoid the sales tax. Price might be identical, but you’re avoiding the sales tax. To me this is a matter of tax integrity.

The person who does that is supposed to pay a use tax and I have heard that retailers or internet sellers feel that it is such a burden to have to collect a sales tax. It is a huge burden to ask Marylanders to pay a use tax. So, aren’t we picking winners and losers if [we] don’t take some action to provide for a level playing field?

Dr. Rubin: I am a big fan of there being some action to help coordinate these issues. I think that as more sales get done on the internet or electronically or through catalogs, state and local governments are going to be at a disadvantage. So, congressional action to coordinate this seems like a no-brainer, from my perspective.

Senator Cardin: Mr. Zinman, I see that you’re anxious to respond, I’m going to give you a chance.

Mr. Zinman: I’m just agreeing.

Senator Cardin: Ok, well, good. Let me just pose the question. There’s two issues that are usually raised by those who have asked for delay of federal action.

One is that it’s a little complicated, because of all the different sales and use taxes. I point out that there’s free software available that would assist in the collection of this.

The other is for a small business exception – which is included, by the way, in the Marketplace Fairness Act. I’m not aware of any small business exceptions on the brick and mortar requirements to collect sales tax if you have a facility located in our state. Is there any administrative reason why we shouldn’t be moving forward on this, that cannot be solved?

Mr. Zinman: Absolutely not. If you look at what’s happing with BestBuy – that is even though they’re multi-state, they’re brick and mortar – they’re hurting a lot because of the internet sales because . . . I’ll give you a perfect example. An individual can go to New York and buy a set of golf clubs . . . and he has a place in Florida. He buys an expensive set of golf clubs, and he says ship it to Florida, no sales tax. It’ll cost him $30 dollars to ship those golf clubs down to Florida . . .

Mr. Henchman: Florida has a very high sales tax.

Mr. Zinman: . . .but he’s not paying . . . he’s supposed to pay. I’m not saying what he’s supposed to do. I’m saying what actually happens. What actually happens is, he is not reporting that sales tax in Florida.

Senator Cardin: I haven’t check with Florida’s use taxes, but my guess is there’s not many being filed by individual consumers.

Mr. Zinman: In New York, we have a line on our New York State – and many states have a line on their tax return – asking the taxpayer to voluntarily compute and give back the sales tax they should’ve paid, in the form of a use tax. But you now take a state like Florida, that doesn’t even have a state income tax form to report this – they have use tax forms, they are there, they’re available. But many people who have multi-state residences – I’m just using New York and Florida as an example because that’s a corridor that a lot of people travel. A lot of individuals are ignoring the taxes they have to pay.

Senator Cardin: It’s my understanding that we have a form in our state where you can include the use tax, we have that in Maryland. The three-hundred-million-dollar number I gave you is a net number. I don’t know the exact amount of use taxes that we collect from individual consumers, but it’s minuscule.

Mr. Zinman: I’m sure its minuscule.

(time-code 89:44)

Mr. Henchman: Senator, very briefly . . . I just want to be sure the goal of simplification is not minimized here. Because while that retailer has to collect, and doesn’t get a de minimus threshold, they are only collecting one sales tax. Internet retailers would have to track and collect 9,600 across the country. And yes there is software on the rates, but that software doesn’t help you to distinguish between all the sales tax holidays, and all the different rates on different products.

Senator Cardin: Are you telling me that computers cannot figure this out?

Mr. Henchman: It’s not computers, it’s tracking the states laws . . .

Senator Cardin: I have my iPad. And I’m amazed at what I can put into my iPad and get an answer immediately. Are you trying to tell me we don’t have a computer program that can figure out this issue?

Mr. Henchman: It’s not a question of computer programming, but a question of tracking changes in legislative laws. There’s a lot of . . .

Senator Cardin: And my iPad gets me the up-to-date information on traffic instantaneously. You’re trying to tell me we don’t have that technology available today?

Mr. Henchman: I work at the Tax Foundation. We do our best to keep track of all state and local laws and changes, and it’s difficult for us, and we’re not running a business.

Senator Cardin: Well, I think you better get a better program.

Gallery: [laughter]

Senator Cardin: I find this hard to understand that when you’ve got governmental actions, which are very public actions . . . every time taxes are changed . . . that that can’t be done? I’m not minimizing the issues of simplicity.

Mr. Henchman: The laws . . .

Senator Cardin: And we’ve been talking about this ever since I’ve been in Congress, which is twenty-some years. This is being used as an excuse for inaction! It’s not a problem that can’t be overcome.

Mr. Henchman: To me it’s not an excuse for inaction, it’s an excuse for the right kind of action. Some of the bills you’ve mentioned have very different . . .

Senator Cardin: Well, after twenty-some years, don’t you think it’s time for some action?

Mr. Henchman: I agree, but . . .

Senator Cardin: Thank you. I appreciate your opinion. Thank you, Mr. Chairman.

Chairman Baucus: I like it!

Gallery: [laughter]

Chairman Baucus: That’s good. Good for you guys.

Gallery: [laughter]

Chairman Baucus: That’s how you get information out.

Gallery: [laughter]

Based upon the testimony and statements provided to the committee, we hope Chairman Baucus and the rest of the committee will act quickly to advance the Marketplace Fairness Act.


Online sales tax collection debated in Wall Street Journal

November 15, 2011
Wall Street Journal

Wall Street Journal: Should states require online retailers to collect sales tax?

The Wall Street Journal has published a debate on online sales tax collection. Taking the pro side is Michael Mazerov, Senior Fellow at the Center on Budget and Policy Priorities in Washington, DC. Taking the con side is Steve DelBianco, Executive Director of NetChoice, a “coalition of e-commerce and online businesses.”

Both sides are clearly and cogently presented, and we highly recommend the article. Of course, as our regular readers know, we’ve long been advocates of the “pro” side. Mazerov does a terrific job of explaining why online sales tax collection is necessary and countering the most common objections to online sales tax collection, while DelBianco’s argument boils down to “it’s too difficult for small businesses.”

But we’ve worked hard to make sure that that’s not true. TaxCloud is designed specifically to remove the cost and complexity of online sales tax collection: It not only provides real-time sales tax calculation, it also handle exemptions and audits—plus, it’s easy to use and completely free.

A quick correction: At the head of the article, the description of the current sales tax situation says that state and local governments are pushing Congress to “require all online retailers to charge sales taxes in all states.” (emphasis added) “Charge” here should be “collect”—as we’ve said many, many times, sales tax is already due on online purchases. The question isn’t whether online retailers should charge (let alone, as some have suggested, pay) sales tax; no matter what, consumers owe sales tax on their online purchases. The question is whether online retailers should be required to collect sales tax. And the answer . . . is “yes.”


UT small business owners urge Congress to pass online sales tax legislation

October 26, 2011
Utah

Utah's small business owners want online sales tax collection

According to an article in the Wall Street Journal, small business owners from Utah traveled to Washington, DC, to “meet with members of Utah’s congressional delegation and Congressman Steve Womack, R-Ark., who introduced states’ rights ‘e-fairness’ legislation last week.” Although the article doesn’t specifically say so, it certainly sounds like the reason for the visit was to persuade Utah’s congressional delegation to support online sales tax legislation.

The article quotes small business owners making some good points about online sales tax collection:

“Small businesses across the state of Utah are struggling,” said Jared Hurst, owner of Rebel Sports, “and the unfair advantage given to online retailers hurts Utah businesses and local communities.” . . .

Betsy Burton, owner of the King’s English Bookshop in Salt Lake City, also supports Womack’s legislation. Her bookstore now draws cutthroat competition from online retailers such as Amazon.com.

“This is a huge economic issue,” said Burton. “Internet sales are getting bigger and bigger and if we can’t compete on this unlevel playing field, it will drive bricks-and-mortar businesses out of business. And we are the backbone of the economy.”

She’s not kidding. For every $1 million in new sales, Amazon creates 0.88 jobs. For the same $1 million in new sales, Best Buy creates 3.47 jobs.

The chair of the Utah Tax Commission, Bruce Johnson, also made a good point, one that we’ve heard many times from local retailers:

“People will go in and shop at a bricks-and-mortar retailer in Utah to get specifics,” Johnson said, “and then go buy the product on the Web to save sales tax.”

An executive at O.co (formerly Overstock.com), which is also based in Utah, repeated his company’s concern that it’s too difficult to collect sales tax for all states.

We know that’s not the case. We know that because we designed TaxCloud specifically to eliminate all the complexity and confusion of online sales tax collection.

We recommend that O.co executives take a look at TaxCloud. It’s comprehensive, easy to use, and FREE.


California-Amazon deal gives hope to states and the Main Street Fairness Act

September 30, 2011
Stateline.org

Stateline.org: Amazon deal with California may set precedent for online tax collection

According to an article on Stateline.org, the deal between Amazon and California on online sales tax collection gives other states hope that they, too, may get online retailers to collect sales tax—though they do not have as strong a position for negotiating as California:

Now that the largest state in the country has seemingly pressured Amazon to change its policy, the result could be a flood of new online tax laws, as other states ask why Amazon can’t treat them the same as it treats California. Danny Diaz, spokesman for the Alliance for Main Street Fairness, a group trying to get the online retailers to collect taxes, says Amazon has undermined its own case by striking the California deal. “You begin your argument by saying you can’t do it, it’s too complicated, it’s unconstitutional and all of this,” Diaz says, “and you end your argument by saying you’ll do it in a year, it’s legal, you can do it. Clearly, clearly the ground has shifted underneath your feet.”

Other states, though, might not be in a position to get the same deal as California. For one thing, Amazon had more of a presence in that state than simply a bunch of affiliates. The company had several wholly-owned subsidiaries in California, which made it tougher for the company to claim that it lacked a physical presence.

The other difference is that California is simply bigger, which may have made Amazon leery of cutting its ties there. Last Friday, the company said it would add 10,000 jobs in the state in coming years. “When you’re California or New York across the table from an Amazon, it’s a pretty big slice of the market,” says Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “We don’t have the leverage that a New York has or the leverage that a California has.”

But, the article continues, the Amazon-California deal inspires even more hope that federal legislation on online sales tax—which would make state-by-state laws unnecessary— will finally pass:

For now, Amazon isn’t indicating that it will offer other states the same deal it offered California. But the company is saying what it would like to have happen next: a federal solution. “We’re committed to working with Congress, retailers and the states to pass federal legislation as soon as possible,” Paul Misener, Amazon’s vice president of global public policy, said in a statement after Brown signed the law. That isn’t a new position. Amazon’s case has long been that it isn’t against collecting sales taxes, so long as a federal deal also makes collecting the taxes less burdensome.

That’s actually what most state officials want, too. Legislation in Congress known as the Main Street Fairness Act would require online retailers to collect sales taxes in the state where a purchase is made, but only if the state is among those that that have made their sales taxes more uniform through an interstate collaboration known as the Streamlined Sales and Use Tax Agreement.

When state legislators came to Washington last week to give their view on federal debt negotiations, one thing they asked Congress for was passage of the Main Street Fairness Act. With Amazon and big brick-and-mortar retailers like Wal-Mart and Target forming an unusual coalition in favor of a federal law, their hope is that their side has the clout to win passage. If the California deal adds urgency to the efforts, all the better. “We’re going to face hundreds of millions, billions of dollars in [aid] reductions,” says Neal Osten, director of the National Conference of State Legislatures’ Washington office. “This is something Congress can do for the states.”

With Amazon, Walmart, Target, and many more major retailers (not to mention the Retail Industry Leaders Association) all joining state legislators from both sides of the aisle in supporting the Main Street Fairness Act, surely the bill’s time has come.

“Still,” the article says, “there are reasons for skepticism.”

For one thing, some online retailers are still taking a hard line against collecting sales tax. Jonathan Johnson, president of O.co (formerly known as Overstock.com), points out that Amazon’s size and wealth positions it to cope with differing sales tax rates and definitions around the country. Smaller online companies might suffer more. “I think the Main Street Fairness Act is anything but main street and anything but fair,” Johnson said in an interview with Stateline. “Big retailers would like to create a barrier to entry for any new company.”

The other reason for doubt is that Congress has struggled to forge compromises on all big issues lately. A proposal that would result in more taxes being collected—even if the taxes are legally already owed—will be an especially hard sell, even if the failure to pass it will likely result in a new round of messy fights between states and online retailers.

If these are the only arguments standing in the way of the Main Street Fairness Act, then we take heart. There are reasonable answers to these objections.

First, the notion that “the Main Street Fairness Act is harmful for small online retailers”: It’s really not. Technology has reached the point that today, it’s no more difficult to collect sales tax online than to calculate shipping rates. Look at TaxCloud, a comprehensive sales tax management service that’s available at no cost for retailers. With services like TaxCloud available—again, at no cost—there’s no reason for any retailer, no matter how small, to find it difficult, costly, or burdensome to collect sales tax.

Second, there is this scare statement that “the Main Street Fairness Act is a hard sell in Congress”: We disagree. While it is easy to simply say things like “it will never happen” or “Congress is too divided,” nobody in Washington DC is saying that about this issue (except for the ATU and NTP). In fact, it’s one of those rare bills that has bipartisan support. It may have been introduced by a Democrat, but it has lots of Republican supporters, among them Senator Bob Corker (R-TN), Senator John Boozman (R-AR), and Tennessee Governor Bill Haslam (not to mention all the Republican supporter in state legislatures, such as Luke Kenley (IN) and Evelyn Lynn (FL), to name just two). We think that once hard facts overcome all the inflammatory rhetoric about the Main Street Fairness Act, voting for it should be a pretty easy decision.

The Stateline article is well worth reading in its entirety for its thorough summary of the arguments for and against online sales tax collection. Just keep in mind that the arguments against it aren’t the last word.


Florida business groups inspired by California-Amazon deal

September 19, 2011

According to a Sarasota Herald-Tribune (FL) article, Florida business groups are hopeful that the deal between California legislators and Amazon—which repeals California’s online sales tax collection law in exchange for the reinstatement of Amazon’s 10,000 California affiliates and requires both groups to work together for the passage of the federal Main Street Fairness Act; if the federal bill doesn’t pass by the end of July 2012, the California law will be reinstated—will “help convince [Florida] lawmakers to take similar steps”:

Mark Wilson, president of the Florida Chamber of Commerce and a member of the Florida Alliance for Main Street Fairness, saw the California deal as a positive sign for Florida retailers.

“If Amazon can collect and remit sales taxes in California, it can do it [in] Florida,” Wilson said. “Recently, both Texas and California passed E-fairness legislation to level the playing field for small businesses. Now, Amazon’s agreement to collect sales tax in California — just like Main Street retailers — proves that they don’t need a special tax deal at the expense of Florida-based small businesses either.”

Wilson said Florida lawmakers now have “a unique opportunity to put small business job-creation ahead of Amazon’s tax subsidies.”

While Wilson has a point—I don’t think anyone would argue that it’s too difficult for Amazon to collect Florida sales tax (especially with services like TaxCloud available)—Amazon has good reasons to support federal online sales tax collection legislation (the Main Street Fairness Act) and oppose state-by-state laws. While the Main Street Fairness Act would actually make it easier for businesses to collect sales tax, state-by-state laws have become so numerous and varied that they make it extremely difficult for businesses to collect sales tax in more than one state.

One way that the Main Street Fairness Act makes it easier for businesses to collect sales tax is by authorizing online sales tax collection only in those states that have simplified their sales tax laws by joining the Streamlined Sales and Use Tax Agreement (SSUTA).

Although Florida’s recent bill to join SSUTA stalled, we would urge Florida lawmakers to pass that bill, and soon. Not only will it make it easier for businesses to collect Florida sales tax, but it will also put Florida in the perfect position to require all online retailers to collect sales tax when the Main Street Fairness Act—which now has the full support of California and Amazon behind it—becomes law.

Joining SSUTA will also make it clear to Congress that Florida, like California and Amazon, supports the Main Street Fairness Act.

Many states have been tempted to skip the step of joining SSUTA and go straight to requiring some online retailers (mostly large ones, like Amazon) to collect sales tax. California started out taking that approach. But as California and other states have discovered, that approach ends up hurting businesses, which have to deal with all the complexities of state-by-state sales tax laws, and in-state affiliate marketers, which are usually dropped by retailers so that the retailer can try to avoid collecting state sales tax. The end result is fewer jobs in the state and no increase in collected sales tax.

Joining SSUTA is the better approach. It simplifies sales tax collection for businesses while leveling the playing field between online and Main Street retailers. We hope this is the approach Florida decides to take.


TaxGirl guest post about Amazon and the Main Street Fairness Act

August 30, 2011
Forbes - TaxGirl Guest Post: Why Amazon Is Doing the Right Thing for Online Sales Tax

Forbes - TaxGirl Guest Post: Why Amazon Is Doing the Right Thing for Online Sales Tax

The infamous TaxGirl (Kelly Phillips Erb), a Forbes contributor, has published our CEO’s article!

Guest Post: Why Amazon Is Doing the Right Thing for Online Sales Tax

Our CEO wrote this opinion piece at the invitation of TaxGirl, for her to publish while on her well-deserved summer vacation.