If you do a lot of online shopping and don’t want to pay higher prices, you really need to learn about the proposed Marketplace Fairness Act.
This is a proposed Federal law that would require online stores to tax all customers: regardless of current state laws.
Right now, very large companies (such as Walmart or Home Depot) have to charge sales tax. However, the vast majority of companies that do business online are small businesses that will be really harmed by this legislation.
And except for sales within their own states, most stores can sell their products tax free. If the Markeplace Fairness Act (and we don’t think it’s fair at all) the prices you pay online will rise unless the store opts to re-incorporated in one of the five states that have no income taxes. (And frankly: that’s not so hard, so most states won’t get much more money. They’ll just lose jobs.)
And guess what? Odds are you’ll indirectly be paying two sets of sales tax. Here’s why, and what you can do to stop it.
Let’s Face It: Many Online Stores Will Just Re-Incorporate to States without Sales Tax
Now do most states need more revenue? Of course, but this law won’t solve the problem. Instead, small and large stores will usually be paying sales tax twice.
That’s assuming of course, that most stores don’t re-incorporate to the states without sales tax. Frankly: this is pretty damned easy to do and we’d be lying if we said we aren’t looking into our options.
Proponents of the bill say that it just levels the playing field. Well: guess what? I could reincorporate in a state without sales taxes in just a few short hours. It’s legal.
To be blunt: it’s a tactic for big multi-billion dollar business (who already spend more on advertising in one week than many small stores gross in a year) to put more small stores out of business. This law is largely being pushed by large firms. It would be a Federal law imposing taxes on states. Frankly, we think it’s unconstitutional, but no time to discuss this right now.
How Most Online Stores Work: Even the Big Guys
Very few stores these days hold much inventory for Internet sales. That includes small businesses like SolarFlairLighting.com and the biggest stores in the US, including Target, Walmart, Home Depot. Even Amazon holds very little inventory.
Instead, stores act as resellers. They buy items (over the Internet) for in bulk or for specific purchases and to cut down on overhead, the inventory is kept at the manufacturers’ warehouses. Whether you buy a light from Lowes or SolarFlairLighting.com; or curtains from a small store or Target: odds are it will be shipped to you directly from the manufacturer.
Now most stores don’t tell you this, but it’s the way e-commerce works. That’s why online stores of all sizes usually offer a wider variety of products than brick and mortar businesses.
Isn’t This Just Leveling The Playing Field for Brick and Mortar Stores? NO!
Most people, myself included, prefer to shop in physical stores most of the time, and I for one prefer to shop at my local hardware store than some chain Big Box store. When these stores don’t have what I’m looking for, I go online.
Secondly: many small stores ALSO run online storefronts. (And if they don’t, probably should be to compete better with the national chains.) This is a smoke screen. Few small stores offer the diversity of online stores. And as discussed above: national stores have already sell online. Do they charge taxes? Sure. But they also have access to numerous tax breaks unavailable to small businesses, both online and brick & mortar.
Why Prices Will Rise: More than One Sales Tax Involved
Let’s say you live outside of Massachusetts, where our store is located. Right now, we only need to charge sales tax to Massachusetts residents. So: most people in Massachusetts buy from stores in other states.
After this law, ALL of our customers will be charged a 6.25 percent sales tax. So if we sell you a $100 solar light, we’ll have to charge all customers $106.25.
We’ll also likely have to raise prices to cover the extra taxes paid to the manufacturers, who will have collect sales taxes to their resellers because most of these sales are also made as online purchases.
Who Wins: Nobody
There’s enough baloney that goes in trying to figure out an accurate shipping fee when you compare online prices. (Because far too many “estimated shipping costs” are accurate.) Then, you’ll have to figure out where the store is incorporated and how much their state charges.
So: states that have very low or zero sales tax will have more stores incorporating in those states. Online stores like New York or California with relatively high sales taxes will take a big hit. Without a doubt, the competition from states with lower taxes will put a lot of stores out of business. Meaning less choice for consumes, which is never a good thing.
What You Can Do About It: Especially Given that our Current House and Senate are On Their Way Out
Sure, many congressmen and senators were voted out of office during the last election. Most of them are going to run for office again: maybe in two years or may be for another office. Many will, without a doubt, be back in elected life soon enough one way or another given the current political climate and many will, for good or bad, be back as your Representative two years from now.
Politicians rarely fade away. Let them know how you feel about this law and that you will cast your vote for or against them if they choose to run in the future based at least in part on this vote that will surely end up costing all consumers more money while reducing your choices. Email them, and here’s how.
Contact Your Congressman or Woman:
If they won re-election, let them know that you’ll be watching. If they didn’t, let them know you’ll watch their vote and remember it the next time they run for office: whether it’s for the House, the Senate, Governor or Dog Catcher. You can find (most) of their email addresses at: http://www.house.gov/representatives/find/
Contact Both of Your Senators
The following link lets you easily find email addresses for all US Senators. Email them today: http://www.senate.gov/general/contact_information/senators_cfm.cfm
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