Congressman Dennis Ross, in an op-ed for Roll Cal, defends the conservative cred of the Marketplace Fairness Act (MFA) which would close the loophole online businesses can exploit in avoiding to collect state sales and creating an unfair “government-sanctioned pricing advantage of up to 10 percent” over brick-and-mortar businesses.
Ross’s main point: that critics of “e-fairness” are misguided in pegging the MFA as a tax increase; and that the Act is, in fact, “built on conservative principles like a free market, open competition and fairness.”
Ross, a co-sponsor of the MFA (S.336/H.R. 684), filed similar legislation when he served in the Florida Legislature, with the goal of creating a more free, more fair market in which all businesses play by the same rules and states make the decision of whether to collect taxes owed.
Opponents of the MFA claim that it would overcorrect the problem, forcing online businesses to collect taxes on behalf of all 50 states (including upward of 10,000 unique tax jurisdictions) based on the shipping address, spiking costs and regulatory burdens in the process. Some even see within the MFA the nefarious consequence of eroding states rights and creating a more complicated tax system, which could ultimately lead to support for a national sales tax.
Ross and his allies counter that the “taxes in question are already owed state and local sales taxes…” and that “for states such as Florida that do not have a state income tax, closing this loophole also brings in an essential revenue stream.”
According to the Senate staff analysis on SB 316 (Detert, 2013), sales tax collections comprise over 70 percent of Florida’s general revenue. Although internet sales are not exempt from Florida sales tax, they are difficult for the Department of Revenue “to enforce because they must rely on out-of-state vendors to collect the tax .. or purchasers must remit the tax themselves.”
According to Ross, local businesses lose out on sales due to this competitive disadvantage, leading to a cycle that drags down localities and the national economy alike.
My take? This is an issue where the problem is clear but the solutions confound.