Because every American state regulates its own procedural methods for collecting taxes, the implementation of new federal standards can be potentially chaotic and confusing. Due to the passage of the Marketplace Fairness Act within the United States Senate, there will inevitably be an overhaul of the national methods for collecting taxes on all online business activities. As the House of Representatives mulls finalizing this legislation, it is crucial to understand the specific language of the bill to determine any personal impacts beforehand. The most important skill to possess is an ability to discern between hyperbolic rhetoric and factual information; as such, a comprehensive overview of this oncoming law is provided below.
The Purpose Of New Regulations:
The Marketplace Fairness Act seeks to consolidate the entire country into a singular method of taxation in an attempt to recoup the annual loss of government income. While the statistics vary drastically between states, it is estimated that millions of dollars are being withheld from regional governments. This shortfall is the result of current loopholes that allow a majority of remote retailers to dodge standard tax rates.
Unfortunately, small businesses that rely on the internet simply do not have the resources to collect taxes from every customer. This is because every regional location is subject to the tax codes of their local government. Therefore, if the new legislation is passed in its current form, states that participate will be required to massively simplify the process of tax management for their local small businesses.
How Location Will Matter:
Currently, online retailers are typically only required to collect sales tax from residents who live within the legal proximity of their business operations. States that choose to adopt these new regulations in the future will be able to enforce sales tax income by setting up free services to conduct the convoluted calculations. Even though the legislation is aimed at universalizing the taxation system, it will not succeed in implementing unanimity among the states; however, instead of having fifty different sanctioned methods for collecting online sales tax, there will theoretically be a mere three.
There may be states that prefer to avoid the adoption of federal tax regulations, and these unions can choose to opt out of the changes. Their freedom from widespread taxation will still be widely limited by the parameters instigated by a new national taxation framework. The second option that states can consider is to operate within the context of the Streamlined Sales and Use Tax Agreement without pursuing further modifications. This would allow them to recover some financial losses without having to commit to creating a new collection system. The final option is to accept the clauses contained within the Marketplace Fairness Act. This would generate the most governmental income, but it also shifts the onus of responsibility and liability onto individual states instead of business owners.
Divisions Among The Debaters:
Advocates of the legislation include the National Conference of State Legislatures and National Governors Association. These organizations wish to revitalize dwindling local economies by relying on increased internet taxes; contrarily, executives from major online retailers disagree with the entire concept. They claim it is excessively detrimental to the ability of individual sellers to compete with corporations. Either way, the Marketplace Fairness Act is here to stay, whether it amounts to economic lubricant or interference.