Internet sales tax would benefit U.S. small businesses

By Adam Gerard
Opinion Editor

The Marketplace Fairness Act, a bill currently being considered by the U.S. Congress to create a national Internet sales tax, would be a positive change that should be approved. If passed, this proposal will increase fairness in the consumer marketplace, help small businesses, and bolster communities around the nation by eliminating the taxation gap between online and “brick-and-mortar” stores in communities.

While some states like California mandate that online retailers impose a sales tax, this bill would make this process more uniform throughout the U.S. and bring in more revenue for states. Additionally, this proposal would get rid of an advantage of shopping online, in turn, increasing marketplace fairness and eliminating the pricing gap the lack of an Internet sales tax creates.

In addition to these benefits, a uniform policy from the federal level would allow all states to be able to take advantage of currently uncollected tax revenue. A study done by the University of Tennessee estimates that $23.3 billion in potential tax revenue is lost annually throughout the nation in uncollected sales tax when combining the e-commerce, phone, mail and direct order transactions that are currently going untaxed. The MFA would change this practice. The extra revenue would provide needed relief to cash-strapped states. In California, specifically, the National Conference of State Legislators estimates that lost remote sales tax revenue amounted to $4.16 billion in 2012.

The standardization of a currently fractured Internet taxation policy would allow businesses and states to comply with Internet sales tax laws more easily.

One of the most valuable aspects of Internet sales taxation is the policy’s tendency to encourage consumers to shop local. In many cases, consumers will buy a product online in order to avoid sales tax. If the MFA passes, it will benefit the physical, “brick-and-mortar” stores upon which communities are based.

Not only would the change in shopping patterns benefit local business, but it would also have other positive effects. Online shopping has a larger environmental impact than traditional methods of shopping in most cases. According to the Institution of Engineering and Technology, there is usually a greater environmental cost of shopping online due to shipping.

Some argue that the MFA would cost taxpayers and hurt small businesses that sell online. However, all purchases should be taxed in the same way, and those not paying taxes on their purchases are simply avoiding taxation. Additionally, businesses that execute less than $1 million in annual remote sales do not participate in many requirements, protecting small business.

The MFA will benefit communities by instituting a more equal system of taxation, create a new source of revenue for states, and protect small businesses.