Congress needs to pass the Marketplace Fairness Act (MFA) so there is real and fair competition reflecting 21st century commerce. America was built on promoting economic growth and business in a fashion that ensures fair competition for all.
Today, online-only retailers are not required to charge and collect sales tax, while local businesses must. However, the sales tax (in all but five states) is still owed. The collection of these taxes is difficult to enforce unless online sellers have either a physical store or a warehouse within the state. When sales tax is not collected at the time of purchase, the burden falls on the consumer to report and pay. Compliance is virtually non-existent. Based on a recent Ohio State University study, states are estimated to lose $23 billion a year from uncollected sales taxes on online goods.
What Is The Marketplace Fairness Act?
The Marketplace Fairness Act originated as House Resolution 684 by Arkansas’ Third District U.S. Rep. Steve Womack and Senate Bill 336 by Sen. Michael Enzi of Wyoming. If approved, it will authorize states to require online-only retailers to collect sales and use taxes on those retailers’ sales. Supreme Court rulings determined sellers only need to collect sales and use taxes for states where they have a physical presence. The Marketplace Fairness Act would return the sales-tax collection obligation to the sellers in all states.
The current sales tax code is unquestionably confusing for consumers and companies. For example, Amazon is now legally required to collect sales tax in 21 states, including the four most populous: California, New York, Florida and Texas. The MFA is not an additive tax. It's about ensuring all companies, regardless of the type of business, pay the same tax.
The tax disparity puts local businesses at a significant economic disadvantage and stifles the overall economy. According to a July 2013 study conducted by Arthur B. Laffer and Donna Arduin, federal legislation that would allow states to close the online sales tax loopholes would result in a more efficient tax system, a larger tax base, and lower tax rates for all taxpayers. This will increase states' prosperity and employment, increasing GDP by more than $563 billion and adding more than 1.5 million jobs in the next 10 years. It is time for Congress to grant states the ability to correct the unfair application of sales tax laws.
How does MFA impact our community? Pinnacle Hills Promenade is a premiere shopping destination in Northwest Arkansas. Pinnacle Hills Promenade is an economic engine and catalyst for growth in Northwest Arkansas and Benton County. Pinnacle Hills Promenade contributes approximately $18.1 million in annual sales tax revenue and property taxes that pay for critical life-safety services such as law enforcement, fire department, education and other services. Pinnacle Hills Promenade employs approximately 1,850 part- and full-time employees. The property has a stellar merchandise mix, including the state's first Cabela's Foremost Outfitters store that opened in 2012. Passage of the MFA allows Pinnacle Hills Promenade and other bricks-and-mortar retailers to compete fairly with online retailers. Bricks-and-mortar retailers are the economic engine that drives the local economy.
The MFA passed the Senate in early May 2013 and is currently under consideration in the House of Representatives. Passing the MFA is simply about enforcement of current tax law. Whether you shop at a store or online, taxation should be fair.
DAVID FAULKNER IS SENIOR GENERAL MANAGER FOR PINNACLE HILLS PROMENADE IN ROGERS.
Commentary on 05/25/2014