Marketplace Fairness Act
The US Senate has just passed the Marketplace Fairness Act otherwise known as the “online tax act.” This act will impact many online retailers that sell to consumer within the United States. Whether you use shared hosting or direct hosting, this new act might impact you. Here's what you need to know.
Who the Act Will Impact
Online retailers grossing more than $1 million annually will have to pay state taxes.
What State Taxes Have to be Paid?
Retailers that sell to consumers in any state are susceptible to state tax. Example: if you sell to residents of New York, Ohio, and Tennessee, all three states can tax your online business.
When Will this Be the Law?
The Marketplace Fairness Act has just passed in the US Senate. Now, the Act has to go to the House. If the Act is passed in the House (and it likely will be), it will be sent to President Obama. Since Obama is a strong supporter of the Act, he will likely sign the Act making it a law. All of this will happen within a few months.
Who Needs to be Prepared?
Most online businesses do not gross more than $1 million annually. This act was really designed to target companies like Amazon and eBay that generate a ton of revenue, but don't pay any state taxes. For the most part, a smaller online shop won't be impacted.
Why This Act is Good
Brick and mortar retailers have to pay state taxes all the time. Taxing online retailers simply evens the playing field.
Why This Act is Bad
If the Act becomes a law, online entrepreneurs might think twice before setting up shop on the Internet. This could hinder the Internet marketplace. Then again, entrepreneurs might decide to set up a physical shop, and that might bring business back to small towns.
What You Should Do
Thinking about setting up an online shop? Weigh the possible state taxes when drawing up your business plan. Incorporate those taxes into a shared hosting or direct hosting package, so that you know what your monthly costs will be. This will give you a better overall picture of what you can expect to pay out each month.
Marketplace Fairness Act: Talk Back
What do you think about the Marketplace Fairness Act? Is it fair or is it simply a bad idea? Let me know below!