How to Tax E-Commerce without Killing Entrepreneurship (and eBay) | BNET Technology Blog | BNET

Thank you for your interesting and well considered article.

The difficulty with VAT in our country is that it would be set and managed centrally by the federal government. Under such a scenario, this central VAT agency would then distribute the proceeds to the various jurisdictions throughout the country at their discretion. If this sounds scary (as it should), it is because our country was founded on the most basic concept of taxation with representation. This is why each state has its own house of representatives and senate - to ensure local representation and local voice regarding why, how much, and for what purpose you and your community will agree to be taxed.

When your town has a ballot initiative for the fire department, or schools -- if those ballot measures are passed by a majority of the voters, then the measure is usually funded through local sales taxes. When you don't pay your local sales tax at the time of a transaction with an online retailer, it is only your local community that suffers. Most people are surprised to learn that when an internet retailer fails to collect your local sales tax, you still owe it in the form of a use tax which must be reported annually on your tax return (although understandably, few people do).

The Main Street Fairness Act (HR 5660) simply authorizes the states to collect sales taxes which are already due. States would only be granted this authority once they have simplified their sales tax systems - of which 23 already have (with a 24th, Georgia coming into compliance January 1, 2011).

When the Supreme Court ruled on this matter in 1967 and 1992 it was too difficult for a remote seller to keep track of the thousands of jurisdictions - which is why they were exempted from the obligation to collect. Moving forward to today, large internet retailers (such as eBay or Amazon) easily manage millions of items for sale at any given moment, and even the smallest internet retailer can calculate accurate shipping rates to every corner of the country in a blink of an eye - it is no longer too difficult to keep track of a few thousand local jurisdictions.

Our company, FedTax.net, is launching a completely FREE service named TaxCloud, which automatically calculates accurate local sales tax for every jurisdiction in the United States. Internet merchants can point their existing e-commerce systems at TaxCloud for sales tax calculation, the same way they point at USPS/FedEx/UPS for calculation of shipping rates. For those states which have come into compliance with the Streamlined Sales Tax Agreement, TaxCloud will also automatically remit collected sales taxes, file periodic sales tax returns, and FedTax.net will act as the primary responder in the event of a jurisdictional audit. - again all for FREE.

It is time to pass the Main Street Fairness Act to ensure local business do not have to continue competing over price with internet-only retailers that are taking advantage of a 43-year old ruling to escape their obligation to collect local sales tax.

R. David L. Campbell
Chief Executive
The Federal Tax Authority (FedTax.net)

via industry.bnet.com

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