Marketplace Fairness Act is a Double Blow for Ecommerce, but Essent has Solutions


No doubt, $11.4 billion in lost revenue is a striking number.


But likely to be just as striking if federal legislators follow through with the Marketplace Fairness Act requiring sellers to collect online sales tax is that the sellers would then have to navigate 9,600 individual tax codes for 50 states and their localities -- tax codes that include gems like these:


* Colorado taxes paper cups but not the lids.


* Florida has a tax holiday for fanny packs and bowling shoes.


* In Chicago, candy with flour is taxed at 1 percent. Candy without flour is taxed at 6.25 percent.


While everyone wants to pay their fair share, adhering to the sometimes arcane, often draconian and certainly non-uniform tax standards of 9,600 taxing jurisdictions is the type of bureaucratic nightmare that makes online sellers sleepless. Or worse, puts them out of business, because collecting those taxes will be costly in their own right.

Web retailers told USA Today they would need to hire staff just to collect the taxes, and others said they would have to rethink their business strategies. Those outcomes actually sound favorable to burdening existing staff with the collections; deciphering, form filling, re-keying, confusion and sheer tedium undoubtedly would undermine productivity and distract from core business.

 The $11.4 billion figure is the amount that would be siphoned from online markets to state governments. The double-whammy is that businesses would have to pay new compliance costs just to extract that money from their online marketplace.

"Anyone who sells online outside of their home state needs to be prepared to collect from 9,600 jurisdictions or lose business,” said Eric Alessi, president of Essent, which makes business management software that can handle more than 9,600 jurisdictions.

The Marketplace Fairness Act isn't good for business, especially small business, Alessi said.

"But if it passes," he said, "our customers are ready for it.”