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MARKETPLACE FAIRNESS ACT 2013

MARKETPLACE FAIRNESS ACT 2013. What is MFA? Who is pushing it? Will MFA pass and become law, and if it does when will I have to collect sales tax? What is Streamlined Sales Tax ? What will I have to do to comply with the law? So the software is free?

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MARKETPLACE FAIRNESS ACT 2013

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  1. MARKETPLACE FAIRNESS ACT 2013 • What is MFA? Who is pushing it? • Will MFA pass and become law, and if it does when will I have to collect sales tax? • What is Streamlined Sales Tax ? • What will I have to do to comply with the law? • So the software is free? • What other compliance issues will I face? • Will I get audited by 46 states? • What is a sales tax audit like? • Questions??? eMainStreet.org AGENDA

  2. WHAT IS MFA? • Marketplace Fairness Act 2013 • Remote Sellers with sales outside of home state over $1,000,000 can be required to collect sales tax for any state they do business • States must meet Streamlined Sales Tax rules or provide free software to calculate sales tax. • Each state must have single tax form and point of contact • States include all US Territories and Indian Nations = 50 states +DC, 5 Territories, 566 Indian Tribes

  3. WHY – WHO IS PUSHING THIS? • Over $50m spent lobbying for MFA ( big box retailers and states hungry for revenue ) • States passing laws / budgets – lower taxes if MFA passes ( or house the homeless / end poverty ..) • Only $3m spent lobbying against (eBay, ATR.org, catalog companies) • Our “friends” are against us ( Amazon, Shop.org are supporting MFA ) • OBJECTIVE – weaken and / or eliminate competition ( US!!)

  4. WILL IT PASS? AND WHEN? • Passed 69 for 27 against Senate May 6th • More opposition in Congress including key lawmakers ( e.g. Boehner house speaker) • Currently under review by Judiciary Committee • Start collecting 180 – 270 days after it passes • Our best guess • Pass without amendment 20% • Pass with amendments in 12 months 40% • Killed off or delayed over 12 months 40% • Democrat control of Congress in 2014?

  5. STREAMLINED SALES TAX • Members: Arkansas, DC, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming • Members = 33% of US population • Standard taxability matrix ( = product categories ) • Rates and boundaries database ( Zip + 4)

  6. NON STREAMLINED STATES • The big ones with complex sales tax laws, CA, TX, PA, NY, FL etc. • Members = 67% of US population • Different Sourcing Rules ( double taxation will occur) • Confusing categories ( e.g. in PA - Clothing non taxable, safety clothing taxable, worn safety items non taxable for some industries ) • Must provide • Rates and boundaries database ( Zip + 4) • Taxability matrix ( non standard with different categories ) • Free software ( who will write it, will it work?) • Single point of contact and tax return

  7. COMPLIANCE COSTS • Learn Sales Tax laws for 22 + states • Review free state software, compare to commercial • Implement up to 22 different APIs with all Shopping Carts, Accounting Systems , Back End, ( Amazon, eBay, ….?) • Categorize products for 22 States • Collect taxes, remit monthly • Territories and Indian Tribes – disallow sales if they require collection of sales tax ( cost > profits) • Conclusion COMPLIANCE NIGHTMARE

  8. SALES TAX COMPLIANCE COSTPercentage of Revenue v Sales Revenue

  9. TAX COLLECTED v COMPLIANCE COST • $240b in sales, 80% big box = taxes collected • $48b sales not taxed = $4b in lost revenue • $400m max for CA not $1.1b • Cost of compliance first 2 years = $4b estimated eMainStreet • $9 to $32 per return, even if tax is $0 • Think $1m retailer filing on Vermont • States do not care about our compliance costs!

  10. FREE SOFTWARE? • SST provides free software now ( vendors keep 2% taxes) • No requirement SST software to be free when MFA passes ( states will protect their taxpayers – >not free) • Non SST states free software quality is unknown • May use existing SST CSP Avalara, Taxcloud, Taxware, Exactor, CCH, Accurate Tax • Worst case 22 different tools, non API software, no shopping cart support • Amazon / eBay will do their own thing! • Possible White Knights – Google?

  11. SOFTWARE COST • CSP per Transaction $0.05 - $0.30 • $9 to $32 per form per state per month / quarter • API Integration $5,000 per state per cart • Integrate Tax Software with Amazon / eBay / CRM Backend phone & manual orders / Accounting System

  12. SURVIVE A SALES TAX AUDIT!? • Personal Liability for under collected taxes (jail time?) • Pay all under collected taxes, over collected does not offset • No statute of limitations, go back 20 years • Not protected from Misclassification errors • Auditors will come back if cost of audit < extra tax • Pays to make auditor work • Can take 1 month on site • State is Judges and Jury • Travel to state to defend in court

  13. CASE LAW • Need special legal software to access • Example Official Flags of US are not taxable • Historical US Flags 48 stars, Betsy Ross? • Marine Corps, Army, Navy? • State will always read laws to gain maximum tax • Must appeal for relieve -> goes to case law • Travel to state for hearing • Must respond within time allowed

  14. ACTIONS • Join eMainStreet.org ( that’s US !) • Contact your Representative and Senator • Join us for fly in to Washington DC June 25th • MarketplaceFairness.org ( aka the enemy ) • TrueSimplification.org

  15. MORE INFO • eMainStreet.org ( that US !) • Sales Tax guide Wikipedia ( Sales Tax in United States) • StrealinedSalesTax.org • MarketplaceFairness.org ( aka the enemy ) • TrueSimplification.org

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