The Times West Virginian

May 12, 2013

Marketplace Fairness Act helps level playing field for small businesses

By Jessica Borders
Times West Virginian

FAIRMONT — Local business professionals like the fact that the Marketplace Fairness Act would treat all retail equally in terms of sales taxes.

On May 6, the Marketplace Fairness Act of 2013 was passed in the U.S. Senate by a 69-27 vote. The legislation now awaits the decision of the U.S. House of Representatives and then President Barack Obama, who has expressed his support of the bill.

Right now, only businesses that have an actual store location in a state can be obligated to collect sales taxes. When Walmart, Target, Kmart and other large companies with a physical presence in states across the nation get online purchases, they have to charge sales taxes. But these taxes don’t have to be collected by Internet retailers, such as Amazon and eBay, unless they have a facility in the particular state.

The Marketplace Fairness Act would give states the authority to mandate that retailers collect taxes for online sales, as well as sales from catalogs and radio and TV advertisements. That money would go to the state where the shopper resides.

Some parties, including representatives from states that don’t have sales taxes, are against the new legislation because they see it as a tax increase.

The legislation includes an exemption for companies that have less than $1 million in Internet sales.

Bridget Lambert, president of the West Virginia Retailers Association, explained that the small-business tax exemption would cover what is considered to be small businesses. Businesses that have more than $1 million in annual remote sales are not designated as small online retailers, and they are competing with other stores that are located in hometowns.

She said the collection of online sales taxes actually falls to the consumer at this point in time.

“These taxes ironically are due to the state of West Virginia,” Lambert said. “It is a tax that already is owed by the consumers.”

State tax forms include a line for West Virginia consumers to remit a use tax. However, there’s usually a large percentage of consumers who don’t remit use taxes. The Marketplace Fairness Act would guarantee collection and remittance for online sales, which isn’t currently happening, Lambert said.

“West Virginia and all the other states are losing significant tax dollars,” she said.

West Virginia’s U.S. senators — Sen. Jay Rockefeller, who co-sponsored the bill, and Sen. Joe Manchin — are both on board with the concept of the Marketplace Fairness Act, which the West Virginia Retailers Association has been supporting, Lambert said.

West Virginia has a lot of main street merchants that support their communities with taxes and employ citizens, she said. They operate locally, but are competing with online retailers that have an advantage.

Lambert hopes the legislation keeps moving foward, because a delay from Congress would have a continued negative impact on retailers, she said.

The West Virginia Legislature recently passed House Bill 2754, and Gov. Earl Ray Tomblin signed the legislation into law. Lambert explained that this is a sales and use tax clarification bill.

It designates that retailers that have a presence in the state — a store or a distribution center — and do online sales must collect the 6 percent sales tax, she said. This will impact Amazon, which has a facility in Huntington, beginning Jan. 1, 2014.

“West Virginia is being proactive as well as our national delegation at this point,”  Lambert said.

She said the federal legislation will uniformly streamline these sales tax practices.

“I would think any chamber of commerce representing small business in the community would be in favor of this because it does level the playing field,” said Tina Shaw, president of the Marion County Chamber of Commerce.

She said she doesn’t think it’s fair if a small-business retailer located in a community offers a product, but a customer can go on the Internet and purchase the same product on eBay or Amazon without having to pay the sales tax.

Email Jessica Borders at jborders@timeswv.com or follow her on Twitter @JBordersTWV.