At the moment, it doesn’t mean anything. And maybe won’t at all, even if it passes the House (it passed the Senate on May 6th). That’s because one key provision of the Bill will exempt many online retailers.
A Simple Matter of Simplification
If you have an online store, you already know you currently don’t have to charge your customers tax if you’re shipping out of state (from your physical location or a distribution center). The basic reason for this is that it had always been too cumbersome to burden retailers with calculating tax for multiple states. However, technology has reached the point that this can largely be automated, and part of the Marketplace Fairness Act requires that state governments, who want to collect the tax, will have to make free software for calculating taxes available to retailers.
If you’ve tried programming tax calculations for multiple states already, you know that this required simplification is sorely needed.
We Know How it Affects Customers, How Will it Affect Online Store Owners?
The Marketplace Fairness Act (MFA) next faces the House of Representatives where, if it passes, it could go into effect as early as October 1, 2013 (conveniently just before the start of the holiday shopping season). Before you start rushing to your e-commerce software to check its tax calculation settings, however, it’s worth noting that the Bill only applies to companies that make more than $1 million in out-of-state revenue. Anything under that, and you’re exempt from the Internet Sales Tax.
If you’re above that, or right on the edge, check your e-commerce system to see what needs to be done to apply tax on all states that charge tax. Most e-commerce software providers already have this functionality built in, and changing your preferences will be as simple as checking a box or selecting different states. In this case, it’s likely the software knows the proper amount to charge and will apply it behind the scenes. If you’re using a custom-programmed store, make sure you speak with your programmer to ensure that all states will be calculated, and that you’re using the latest tax calculation tables and keep them updated.
For more information on the Marketplace Fairness Act, visit http://www.marketplacefairness.org/what-is-the-marketplace-fairness-act/.
And be sure to get your shopping done early this year.
Kirk Hiner is the E-Commerce Solutions Manager at Dynamics Online.
You can reach him by calling (216) 292-4410.