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Strategies: Online sales-tax bill levels field for small biz

Rhonda Abrams, USA TODAY
After about a decade of battling, Amazon, which collects sales tax in nine states, now supports the Marketplace Fairness Act and collecting taxes for online sales in states that have sales taxes.
  • Local businesses have to pay sales taxes on stuff you buy
  • Only online businesses with a physical presence in an area now have to do the same
  • Customers are supposed to remit unpaid sales taxes on yearly state tax return%3B do you%3F

If you own or shop at a local small business, write your member of Congress.

If you have kids in public school, use local parks, drive on local streets, write your member of Congress.

If you work for a local police or fire department — or depend on them to keep you safe — e-mail, call, tweet or write your House member. Urge that person to vote for the Marketplace Fairness Act.

The Marketplace Fairness Act, long-overdue legislation allowing states to require large online retailers to collect sales tax, would be better named the "Mainstreet Fairness Act," or "Save Your Small Business Act." It is expected to pass the Senate after lawmakers return from a weeklong break next week, but it faces a far harder battle in the House of Representatives.

So Congress needs to hear from you — especially if you own, run, or love a small business.

During every election, candidates profess their support for small businesses, but now is the time to show they mean it. The Marketplace Fairness Act levels the playing field between online retailers and brick-and-mortar stores.

Right now, if you buy a book, camera, shirt, or any other thing on the Internet, it's fairly easy to avoid paying sales tax.

But if you walk in to a local store, you have to pay such taxes. Why should we hamper our local businesses this way? Why should government give an unfair advantage to one type of company — online enterprises — and not another?

Sure, big companies like Walmart and Best Buy benefit if the playing field is leveled and large online retailers have to collect sales taxes. But I'm more concerned about the help the Marketplace Fairness Act gives to small businesses.

I'm in the publishing business. Two decades ago when Amazon was just starting, this country had more than 4,000 independent bookstores. Today fewer than half that number survive.

Does your beloved small bookstore exist in your town any more? Not likely.

This affects us in bigger ways than you might know: When sales go online to companies that don't collect sales taxes instead of to local stores — whether big or small — that do, financial support for your schools and parks, your fire and police departments, your streets and infrastructure disappear. You lose local jobs and housing prices decline.

Interestingly, Amazon, which collects sales tax in nine states, now supports the Marketplace Fairness Act and collecting taxes for online sales in states that have sales taxes. Why? The company increasingly sees its future in setting up warehouses and making local deliveries, making them subject to collecting sales tax. eBay is now the largest online merchant against the legislation.

A lot of misinformation is being spread about the Marketplace Fairness Act, so keep in mind the facts.

Here's what the MarketPlace Fairness Act is not:

• An imposition on small online businesses. Businesses with less than $1 million in online, out-of-state sales are exempt.

So if your barbecue joint also bottles your delicious sauce, selling most of it to locals or in-state customers, and you sell $500,000 a year online to out-of-state customers, you don't have to collect sales tax.

• Complex. Opponents say figuring out all the different taxing authorities and remitting the proper amounts to each would be difficult.

But this software already exists and can be built in to online shopping carts easily.

• A new tax. These taxes already exist. You probably don't know this, but you likely are required to pay a use tax on anything you buy on the Internet or from an out-of-state retailer.

Governments find it easier to collect from businesses than individuals. (C'mon, you didn't pay a use tax for that camera you bought online, did you?) Courts previously said that states could not compel out-of-state retailers to collect the tax. The Marketplace Fairness Act now allows them to do so.

• A tax on the Internet. The bill does not tax Internet access or bandwidth or anything else connected with providing you with Internet services or the underlying infrastructure.

What it is:

• Fair.

• Easy.

• Long overdue.

Collecting sales tax will not wipe out many of the other advantages of buying online — convenience, sometimes lower prices or free shipping. But at least the government won't be tipping the scales in favor of larger e-commerce companies.

Let's do something for local small businesses and your own home town. Urge your representative to support the Marketplace Fairness Act.

Rhonda Abrams is president of The Planning Shop and publisher of books for entrepreneurs. Her most recent book isEntrepreneurship: A Real-World Approach. Register for Rhonda's free newsletter at PlanningShop.com. Twitter:@RhondaAbrams.

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