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Marketplace Fairness Act Part 3

Yesterday’s pre vote discussion on the Marketplace Fairness Act was very frustrating. I have to admit, we have used some of the soundbites against the Senators who made them on our Twitter feed. Sometimes humor is simply the best way to make a point and we mean no disrespect to any Senator on any side of the aisle. There are several misconceptions that need to be cleared up.

The single most important thing to me is that we reframe this issue. The political elites, mega retailers and perhaps some in the media would like you to believe that this is ‘Main Street Retail’ versus  ecommerce. Nothing could be further from the truth. Small business online as well as brick and mortar stores deal with the same issues from the same mega retailers day in day out. These big box stores are the competition for all small business, traditional and online.

WalMart has made it clear. This bill, according to their own statements is their number one priority. One senator unabashedly admits that he supports the bill because it supports WalMart. This bill forces small business to play on their turf. If that is the ‘level playing field’ this bill seeks, I think small business can do without.

The next misconception I want to be clear about is that those of us who sell over 1,000,000 are rich executives in the top 1% of businesses online. Our business is an up and coming one. My family is a family of 8, we drive two older used cars both with about 150,000 miles. We live in a rented home in a modest neighborhood. Like most of the country we work hard every month to make ends meet.

Now one Senator compared the ease at which small business could implement this bill to the ease at which he checks the weather.  First, let me remind the respected Senator that we are talking about ‘checking the weather’ via an automated system in nine thousand six hundred locations. Then we are talking about integrating that into two separate software packages — a shopping cart and a small business accounting software. While there are absolutely tools in this bill that provide resources, the process will be anything but simple. We had estimated the costs at about $40,000 to get started. I spoke with the owner of Onlinestores.com he believes we are being overly optimistic — The costs will be much higher.

The concept that the ‘Free Software’ referred to by politicians and mega retailers somehow make compliance free and easy is the equivalent of proposing Supermarket Club Card as an alternative to food stamps

As we were talking, we both realized that we had missed the cost of actually collecting the money. Simply put, every credit card transaction costs between 2.6% and 3% to process after figuring the additional fees. Small Business would be absorbing those costs.

Another Senator, referring to the bill, acted as if the 9600 jurisdictions was ridiculous and untrue. He pointed to a portion of the bill where it says there will be a single agency. While that is true, under that single agency are thousands of different cities, counties, etc. all of which have their own tax rates. While that one agency would be the reporting agency, there would still be well over 9,600 jurisdictions. If we were talking about a single rate per state, this bill would be much easier to swallow. The truth is that the law is so complicated that even ZIP codes are insufficient for calculating the ‘simplified rates’. You can have multiple rates in the same city and the same ZIP.

Compared to many online businesses, we have it easy. We were talking to a flag manufacturer. His products are taxed depending on what the flag represents and what state he is shipping it to. Again, that’s a little tougher than checking the weather.

If the argument is that state laws need to be enforced and that people need to pay sales tax based on where they are using the product, then that argument needs to be applied across the board. Many people will drive across city or even state boundaries to make a major purchase. Home electronics and appliance stores will frequently locate just outside city limits. If we are going to apply the same principles to all businesses, then brick and mortar stores would need to charge tax based on where the product is being used as well. That’s not fair to them and its not fair to us.

Briefly, often it costs me as much to ship the product as the product itself costs. We ship it to the customer for free. All business models have their advantages and disadvantages that’s why each entrepreneur choses his or her model carefully. While I collect less in taxes I have to charge more because of shipping costs.

I have frustrations with the anti Marketplace Fairness Act folks as well. If it is true that you voted down every amendment because you did not like the bill, shame on you. Just because you do not like something, does not mean you don’t work to improve it. If this bill had come out of committee with an exemption tied to SBA.gov standards and a single rate per state, the bill would still be awful. BUT it would be manageable and substantially less expensive to implement. We have allow our lawmakers the ability to work on improving a bad bill and still vote against it. Often we cite that as hypocrisy but it is nothing of the sort.

Another point of confusion with this bill is that the concept is somehow new. There were many catalog stores that fell under the same laws well before the internet ever became popular — perhaps before Al Gore even invented it.

The bottom line is that while states need the revenue, they simply do not have the right to collect it at the expense, hard-work and risk of small business. Further, to pretend to be doing so to protect small business while actually protecting WalMart is, or at least should be criminal.

 Follow the argument on twitter @garflooringllc & #MarketplaceFairnessAct