Taxes have been a major focal point for many Americans for some time now, and now a proposed change to the nation’s code may lead to major changes for small businesses to contend with in the near future.
The Marketplace Fairness Act was recently introduced into the U.S. House of Representatives and now awaits approval from the House Judiciary Committee, and would have a major impact on the ways in which companies large and small are able to do business going forward, according to a report from the Fort Worth Star-Telegram. Essentially, what the law would do – ostensibly as a means of leveling the playing field between large entities that do a majority of their business on the Internet and smaller, independently-owned companies – is make it so that purchases made online carry sales tax for the state in which the buyer lives.
The thinking behind the law is that many consumers may buy items online, instead of from businesses within their state, to avoid sales tax and potentially pay lower prices than they do now because many large online retailers have the ability to charge less and still turn a profit, the report said. By ensuring that these companies have to charge the sales tax for the state in which the transaction originated, that would essentially provide a disincentive to bargain hunters who are looking to skirt those taxes, and in doing so would likely be costing states millions of dollars in additional revenues every year.
This would, in theory at least, also be good for smaller businesses who do not have the means to keep up with larger competitors when it comes to low prices, because consumers might instead opt for buying local when the steepness of their discounts drops, the report said. Many lawmakers and small business owners alike are on-board with the law, talking at length about the benefits it will provide to smooth over disparities between major retailers and their smaller counterparts.
“The act is not simply about taxes,” Bill Porter, a small business owner in Arlington, Texas, told the newspaper. “It’s also about saving the bricks and mortar businesses across America. Every day our store loses at least one sale to an out-of-state competitor because of a tax issue and the situation is only worsening.”
Does trouble loom?
However, there are also some experts who believe that law could be overly burdensome to small business owners who tend to deal with a lot of online orders, even if those come in addition to real-world purchases, the report said. While the Marketplace Fairness Act would apply only to companies with more than $1 million in annual revenues, that would still cover many enterprises who still have few enough employees to be considered small businesses.
It’s believed that under the law, all companies to whom it applies would have to prepare tax documents for every state from which they have received orders, meaning that small businesses could end up preparing as many as 50 different tax returns when filing season begins. That would also likely entail buying updated software to organize all these issues, and also potentially face audits from a number of different states at the same time.
Owners worried about the costs that such a law might bring if it goes into effect may want to do more to free up as much money as possible, which might include finding more affordable small business insurance. Cutting costs for policies including those for liability insurance may help to give them added affordability that may make the transition under such a law, should it pass, a little easier to handle.