‘Marketplace Fairness' Online Tax Waits for Congress

by Luke Jones  on Monday, Oct. 21, 2013 12:00 am  

From left, Robert Coon, Randy Zook and Chris McMillen

“This is a permissive, not a requirement,” Coon said.

There’s also one demographic that has, at best, some reservations about the legislation: small and medium businesses with online components, especially Web developers that design sites for retail businesses.

Brent Birch, director of Flex360, the Web design division of Arkansas Business Publishing Group, said the problem is with implementing the software for the change, which will have to be accurate across all 50 states.

“Tax tables will have to be integrated into their e-commerce platforms and be dynamic enough to be updated in real time,” he said. “How many online retailers are prepared for that? Likely not many outside of the huge outfits. And the cost to implement will likely be passed back to consumers in one way or another.”

He said the process of enforcing collection of sales tax from out-of-state customers, then remitting them back to the customer’s state, would be a “nightmare.”

“Also, what retailer is going to be excited about collecting taxes, then passing back dollars to states where they have no presence and no vote?” he said.

“It would be so hard to regulate,” said Greg Eberdt, vice president of ArkansasWeb, a Web design and hosting company in Little Rock. He said sales tax is “already difficult enough to figure out now. For small businesses, it’s going to be a nightmare.”

Eberdt said many of ArkansasWeb’s clients are smaller businesses with online segments, and they’ve expressed chagrin at the bill.

“Some have actually gone out of business just trying to compete against some of the bigger stores that are online now,” he said. “Having to pay taxes on top of that will definitely hurt them. Most of them are not equipped for totally changing their whole system and the way they’re able to calculate stuff and ship properly. It would throw them into a frenzy.”

Chris McMillen, president of Little Rock Web developer Mass Enthusiasm, said his clients have expressed similar opinions. In particular, he said it will become a problem when adapting each business to Arkansas’ many sales tax codes.

“It’s not just a simple, flat tax,” he said. “It’s down to county, street, ZIP code and by state. It makes it very difficult. There’s a lot more labor involved on our end to fulfill a project for a client when a tax situation like that is implemented as well. It prices us right out of the market for a small business.”

Eric Caldwell, CEO of Web-Jive LLC, said the $1 million cap is problematic. A business that just approaches or passes that limit might find itself underwater quickly when trying to implement the software for the tax collection.

 

 

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