Marketplace Fairness Act and Your Website – 2013

by Gerald Bauer, owner & founder

At JB Systems, we’ve been building custom eCommerce and checkout solutions for quite some time. We’re no stranger to taxation codes regarding online sales either. Determining whether a company has state “nexus” has always been an interesting endeavor, as its definition and reporting requirements changed from state-to-state.

As it stands, companies that have “nexus” in states are required to collect that particular states’ worth of sales tax (sometimes city, county, and metro taxes as well) on any online purchases of items subject to tax. This involves subscribing to tax tables and making sure an eCommerce system automatically updates its tax algorithms on a monthly basis, so that monthly, quarterly, and year-end sales tax reports are as accurate as possible. Cities, counties and states change their tax policies quite regularly, so this can be a daunting task.

Over the past decade, our legislators have caught on to the lost tax revenues due to the explosive growth of online sales. The Marketplace Fairness Act, introduced to the senate floor by Mike Enzi (Republican) of Wyoming in February, 2013, may require ALL online retailers to collect sales tax. Although states have to participate in a process to simplify their state tax codes before adopting this new revenue source, our guess at JB Systems is that states can no longer afford the estimated $24 billion  in lost revenues a year.  That estimate is projected to continually increase over the next decade.

Without further, more in-depth research, we’re led to think state legislators will want online stores to collect taxes on all purchases, using the tax codes from the state of which the “billing information” is associated with. This will ensure that all states will collect their “fair share” of taxes on all purchases originating from within their borders, regardless of where the purchasers are from.

What does this mean for your website?

Well, if you sell a good or provide a taxable service (see your accountant, or Bauman & Associates) – your website will need to have the necessary “logic” added to the taxation algorithm to properly determine state taxes, regardless of your nexus status or where the purchaser originates from.¬† Lucky for JB Systems’ customers, we’ve seen this on the horizon and have several easy-to-implement, cost effective solutions to handle this in our custom eCommerce platform.

If you have any questions, or are interested in taking your eCommerce store to a more tax-compliant platform, contact us today and setup a free consultation. Thanks for reading!

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