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How Fair is the Marketplace Fairness Act?

Posted by Jeffrey Pape on

This year, WrestlingGear.Com will be celebrating its 15th birthday. Not only is this a major milestone for our company and brand, but it’s a major milestone for small businesses in general.

But if you know anything about the Marketplace Fairness Act, you know that my business doesn’t even classify as a small business. At about $1 million in annual sales, we will likely not hit the $30 million dollar limits that the SBA still classifies as a small business. So why the $1 MM threshold?

Let me take a second to break things down for you. The Marketplace Fairness Act believes “a sale is a sale.” This will force e-commerce sites, such as WrestlingGear.Com, to collect sales tax on every sale.

What does this mean for you?

For every online, telephone, catalog, Amazon or eBay transaction you make moving forward, you will be required to pay a sales and use tax. Regardless of overall intent, ultimately the MFA will force consumers to pay more for the goods they purchase online. In fact, many consumers said they may even change their online shopping habits if the Act passes.

A personal example, I purchased a camera for my business from New York. I paid Illinois use tax of 6.25%. If this bill passes, I’d have to pay 8%. How is that not a new tax?

What does this mean for WrestlingGear.Com?

If passed through the House, the MFA would require ecommerce retailers who make more than $1 million per year in states they do not have a physical presence to collect sales tax as well as pay taxes to each customer’s state and local government.

Now back to how we compete. Big businesses don’t carry the breadth of inventory we carry in our warehouse/store. It’s that simple. We have more wrestling gear, clothing and equipment than traditional brick and mortar stores. We take care of our customers, ship fast, and handle their problems. Many people are surprised when I pick up the phone that they are talking directly to the owner. Our ability to operate and be flexible over the years is due in large part to being 100% focused on our very thin margins.

For 15 years that’s been our “secret” to success. To quote an article that our small business was featured in from 2008, “One of our focuses when we started was that we had to make money on every transaction. We paid attention to our margins. It was pretty basic.” It has always been our goal to keep things simple, and this bill will complicate things for our small business.

Because of MFA, we will be forced to change our website shipping costs, manually code more than 500 products we sell, update our accounting system, update our catalog and phone taking system, as well as pay an accountant to file 45 sales tax returns monthly. These costs will be passed onto you. And that is all on top of the new taxes.

What’s Next?

While the Marketplace Fairness Act passed through the Senate with ease, it’s not fairing quite as well in the House. The Act will face a vote here to determine what happens next. There is no vote date set for the bill to be seen in the House and even if it does not pass, it will move to the President who has already expressed support.

Want to learn more? Check out some useful videos for getting up to speed on the MFA:

- US Representatives speaking against internet tax – Video 1

- US Representatives speaking against internet tax – Video 2

Share your opinion with us. We’d love to know what you think!