Business news : US, Federal Internet Tax Bill Exempts 93.5 Percent of Online Retailers

The Marketplace Fairness Act now being considered by Congress would affect just 4.5 percent of online retailers but 57 percent of total U.S. online sales,  according to a study by the U.S. Small Business Administration.

Assuming the bill adopts the $1 million small seller exemption (SSE) that has been proposed in several bills, it would only affect 4.5 percent of electronic shopping and mail order houses and less than 2 percent of all non-store retailers, or an estimated 1,817 such companies. The report calculates that 974 of the Internet Retailer Top 1,000 companies have sales exceeding $1 million.

A higher SSE of $5 million would affect an even smaller share of online retailers, but the share of online sales affected would remain near 57 percent

Determining the impact of sales tax legislation on actual collections is complicated by the fact that many of these firms are already collecting sales taxes for a large number of states in which they currently have nexus. The study examined a sample of online retailers representing 231 of the Internet Retailer Top 1,000 companies. It found 38 of the surveyed companies (16 percent of the total) collected sales taxes for all 45 sales-taxing states. Only 8 of the surveyed companies (3 percent of the total) do not collect any sales tax, and 57 (25 percent of the total) collect in only one state. The average online retailer among the 231 in the sample collects sales taxes in about 18 states, representing about 47 percent of the total national state and local sales tax collections.

The study concludes that an SSE provision would reduce administration and compliance costs for small online merchants. It would also reduce the potential revenue gains to state and local governments by exempting a portion of online sales from taxation. The uneven sales tax collection playing field in the current policy environment has helped many small online retailers at the expense of many small “Main Street” vendors. However, Main Street vendors—small and large alike—would continue to be disadvantaged relative to many online and mail-order vendors that would be protected by an SSE.

By press release through Sportsonesource