Below is an OpEd story written by R. David L. Campbell, CEO of TaxCloud. Campbell’s original story appeared on the website Politico as part of the site’s ongoing coverage of the debate over the Marketplace Fairness Act. The Act failed to pass in 2013, but the topic is once again being discussed in the U.S. House Judiciary Committee. One of the arguments against the Act is potential complications to online retailers when it comes to collecting the state sales tax. NAED is a huge supporter of the Marketplace Fairness Act.
By R. David L. Campbell/CEO of TaxCloud
Online retailers are a tech-savvy bunch. They seem to know what we want, when we want it—and how to get it to us as quickly as possible. But a few of the same companies that have figured out how to target our shopping habits and ship products of all shapes and sizes around the country are now claiming that collecting sales tax is too hard.
These critics of e-fairness legislation have suggested that private-sector software already widely available for collecting sales tax is incomplete, complicated, and expensive. As an e-commerce entrepreneur for almost two decades, and as cofounder and CEO of TaxCloud, one of several online sales tax management services, I’d like to offer the truth about online sales tax.
The same technologies that enable smartphones also make sales tax calculation quick and easy: At TaxCloud, our software works directly with e-commerce platforms to calculate sales tax during each customer’s checkout. Everything needed to figure out the correct tax rate is already present during an online sale: the purchaser’s address, the sales price, and the type of item being purchased. That information is used to calculate the appropriate sales tax in a fraction of a second, just like shipping charges. Don’t be fooled—calculating sales tax is not laborious or burdensome. It’s really quite simple.
Collecting sales tax is not very expensive, either: Software and services that manage sales tax collection aren’t hard to find or expensive; in fact, in some states the service is free. Opponents of an e-fairness solution have made numerous misleading statements about the costs of software, presumably to preserve the preferential treatment they currently enjoy in the tax code. For instance, while publicly railing against the expense associated with online sales tax, eBay actually features a sales tax utility on its own website that costs $15 per month. And many third-party online storefronts or marketplaces can handle sales tax collection for their merchants for a very small fee. The cost of software is simply not an impediment for small online sellers.
Set it and forget it—why software makes it easy: It’s true that any sales tax system will need to know the type of item being purchased in order to determine if it’s tax-exempt. It’s important to remember that bricks-and-mortar sellers have always been required to assign tax classifications to their wares—this is not a new concept or obligation. And here again, the rhetoric does not match reality.
First, most small online stores tend to be specialists—they’re more likely to be selling one class of products than a wide range—and if that’s the case, all a seller needs to do is set their entire store to one tax category. Click—done. Second, even if a small online retailer sells many kinds of items, they would only need to assign categories to tax-exempt items, a small subset of most stores’ inventories. Click, click—done. E-commerce platforms are designed to assign large groups of items to tax categories, so no online seller will spend their time worrying about whether an item is tax-exempt or not. The bottom line is that once these categories are set, online retailers can focus on serving their customers—not on tax collection.
Tax returns aren’t filed by horse and buggy anymore. Despite the oft-repeated claim that compiling and filing sales tax returns with multiple states will create huge burdens and audit risks, the fact is that all of the existing sales tax management services can take this task off an online retailer’s hands entirely. Agreements with individual states let these services handle filing returns and remitting tax proceeds, without any effort from the retailer themselves. Most of these services also store all returns associated with your account, so accessing past records is a breeze.
Twenty years ago, opponents of remote or online sales tax collection were correct—collecting sales tax was rather laborious and time-consuming. But the same burst in technology that now allows consumers to shop anywhere, anytime, and have whatever they want delivered to their door in under twenty-four hours, also makes charging sales tax remarkably simple. For online stores, collecting sales tax is easier than configuring shipping charges. “Doom and gloom” predictions about the technology are misplaced—and any suggestion that sales tax management systems don’t already exist is simply wrong.
If Congress believes that online retailers should be exempt from the same laws and tax policies that every other business complies with, that is of course their right. But they shouldn’t make that determination based on the misguided and misleading rhetoric spun by those who stand to benefit from special treatment. And if Congress chooses to end the current disparity and treat all retailers equally, rest assured that the free market has already developed the tools and software necessary for both online sellers and brick-and-mortar retailers to thrive and grow in the decades ahead.
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