The US Senate recently passed the Marketplace Fairness Act which will allow states to require out of state online retailers to collect sales tax on their behalf. The President has stated through his spokesman that he will sign the bill if it passes the House therefore it is wise for companies to plan for implementation. The law will apply to any business that does more than $1 million in annual sales. It will also require the states to provide free Internet sales tax software programs to qualifying businesses. This will ease some of the burden and probably won’t be as complicated as some may fear.
Free software comes with liability release
Right away the law makes it easy for businesses to comply if they are required to do so based on their total sales. Each state that wants to collect - and you can plan on most of them wanting to do that - will have to provide businesses with free, bolt on software to their e-commerce platforms that will calculate sales tax should a purchase be shipped to one of their cities. In addition, the states must setup a single agency responsible for managing sales tax issues related to internet sales. That means businesses just have to deal with that one agency rather than 46 individual state agencies. The law would also exempt sellers from any liability caused by mistakes created by the software or the state.
The software does not need to perform magic
E-commerce systems already routinely handle much more complicated tasks than sales tax calculations. Shipping costs, for instance, are vastly more complicated to determine programmatically, yet millions of transactions are successfully processed every day. Shipping varies by origin, speed, destination, weight and volume. Yet all of those factors are considered and a price quoted to a customer in less than a few seconds. PCI Security Compliance is another example – these constantly changing set of encryption algorithms are already being managed by any online vendor.
If you are a company doing enough in sales to qualify for this law, then most likely you already use a very sophisticated e-commerce system to handle your orders. Adding a sales tax calculation component will be simple when compared what is already in place!
The bottom line for businesses is that technology will not be a problem. The 90 day lead in time to implement everything before sales tax needs to be collected will be sufficient. That is not to say that there won’t be other issues that arise from this legislation. At Oates & Co, we are keeping a close eye on its progress and any amendments that may be added before it is signed. Contact us for more information on how we can help you manage solutions for your company.
