SALT Report 2549 – A group of more than 50 small business organizations announced that they have formed a coalition to defeat the Marketplace Fairness Act. The group is called the eMainStreet Alliance and their assertion is that the MFA unfairly burdens small businesses and will subject them to an increased audit risk.
The Alliance has spent nearly a year researching the bill, calculating the costs of compliance, and evaluating the effects the MFA will have on their businesses. That research has identified what the Alliance believes represent an unfair targeting of small businesses. If the MFA Passes:
- Online businesses would be exposed to increased audit risks and economic loses from having to comply with laws in more than 9,600 taxing jurisdictions. The Alliance estimates that they will pay between $20,000 and $300,000 in compliance costs in the first year alone. These additional costs will eventually force many of these businesses to close.
- Small companies will stay small. Small online retailers will never be able to grow past the $1M MFA threshold because they will be punished with higher taxes and MFA compliance if they do so.
- The cost of compliance for those that do survive will significantly reduce their earning potential. Many eMainStreet Alliance members estimate that MFA compliance costs will surpass the profits they earn in an entire year. This consequence will likely force these businesses to lay-off employees, or close.
- Online businesses will be subject to an increased audit risk in 46 states in which they have no physical presence, no political representation, and no right to vote. If these businesses are found to be out of compliance, the owners will likely be held personally liable for any amounts found due in the audits.
Supporters of the MFA say that the provisions in the bill will protect brick and mortar businesses from small to mid-sized online retailers. However, these smaller online retailers have little impact on brick and mortar stores as the big-box retailers accounted for more than 83% of all online sales in 2012. Walmart, Best Buy, Home Depot and Amazon.com support this bill because small businesses who sell online represent a threat to their market share, and therefore must be eliminated.
If the MFA passes, the big-box market-share will increase significantly. Because of this, the eMainStreet Alliance is urging all online businesses to protect themselves from the MFA by joining together to defeat this bill.
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