Taxcloud Letter to Speaker Boehner (11/18/14) – A Rebuttal

Wow, what a steaming pile of Pivot.

In case you haven’t heard the term, “pivoting” is what you do when your idea isn’t working.  It’s mostly associated with start-ups who realize their ideas/business model isn’t working, so they “pivot” to another.  It’s mostly a euphemism and frequently used as a mocking put down when the pivot clearly is something that is such a 180 degree turn from their previous direction.  Sometimes pivots work, many times they don’t.  More often than not, it’s a sign of desperation.

So what is the Marketplace Fairness act about?

The Marketplace Fairness Act is about a “Level Playing Field” & Fairness

The Marketplace Fairness Act is about Saving Main St & Local Businesses

The Marketplace Fairness Act is about States Rights

The Marketplace Fairness Act is about Free Markets

The Marketplace Fairness Act is about Billions of Tax Dollars not being collected 

“Continued inaction by Congress on the matter of online sales tax collection leaves online retailers vulnerable and unprotected from an increasing onslaught of inconsistent and difficult-to-manage state laws”

So now Taxcloud has COMPLETELY changed their pitch for the big-box retail-funded MFA – and they’re doing it for us: Online Retailers.

Wow, that’s sure nice of them.  Especially since I’ve taken them to task repeatedly for lying misstating facts, misrepresenting their capabilities to elected officials and any one who will listen…over and over again.  Way more than any other of the 6 Certified Service Providers (CSP) who can process sales tax with the streamlined states.  And of course, it’s utter nonsense.  Their support of the MFA is to receive a windfall of dollars from the states if it passes.

So lets go through the letter

“We understand the anxieties of those opposed to the proposed online sales tax legislation because we used to share their concerns about complexity, compliance costs, and audit risks. “

Yes, you USED to share them, but now your sell tax services, so there’s no fear for you anymore.  You’re not an online retailer.

More importantly, Taxcloud has repeatedly overstated their solution’s abilities and understated actual, real complexity, compliance costs and audit risks that are 45 times worse if MFA passes.  I go from 1 possible state audit to 46 states that can audit me.

“In fact, our founders all worked at e-commerce companies previously, where we endured just such difficulties with sales tax compliance.”

Really?  Not to be nitpicky, but I only see 1 of the founders with what I’d consider any retail ecommerce experience.

“But as we’ve discovered, technology has given us the tools to put these concerns to rest.”

But as before, this is just not true.  Marketing speak.  Plenty of articles on this blog regarding exact and detailed concerns with all of the above.  More importantly, Taxcloud doesn’t support our setup, order processing software and third party sales anyway… so even if they sold this unicorn powder, it’s irrelevant if they don’t support our setup.

Then, a few half-truths at best regarding what their services include:

“responds to audit inquiries, and even provides indemnification in the unlikely event of errors”

We’ve covered this in other audit-related posts, but Taxcloud might provide some initial data, but when a state audits you, they require a great deal of information (in my 2 audits experience) that Taxcloud does not possess.  Details about internal purchases, copies of Federal tax returns.. a variety of documentation.  This also would only be for level-1 sellers where Taxcloud provides ALL tax processing services – currently impossible for most.  So you’d be a level 4 seller – and the states would go to YOU for ALL audit info.

And the indemnification is extremely limited, it’s only if Taxcloud makes an error or if the states gave bad tax rate data to Taxcloud.  It doesn’t cover anything else at all.  Some tech glitch on your end?  Not covered.  One of my 5000+ items misclassified? Not covered.

“Our service is free because we are a Certified Service Provider (CSP), meaning that we have been hired by the SSUTA states”

Free for an ecommerce site that’s simple enough to be supported.  We’re not.  We would become unpaid tax collectors and even pay credit card fees on the newly collected taxes and get nothing.  Taxcloud makes 8% of the sales tax.

 “Our point is this: sales tax automation technologies are available right now and work very well. The argument that the technology does not exist to easily handle remote collection of sales taxes is simply without merit—it’s nothing but an excuse for unwarranted delay.”

Let’s take a trip down memory lane on this one.  Taxcloud has repeatedly dramatically overstated what they can do and the state of their capabilities and supported carts while making these exact same statements for the record.  Some in our group have called them lies, I’ll let the reader decide.

TaxCloud – 2010 Statements vs. Capabilities


  • Rosy comments 3 years ago about ease sellers would have handling compliance
  • Recommended $100,000 small business exemption but only because he couldn’t offer zero exemptions
  • At that time in 2010, Taxcloud was certified only 2 months earlier
  • Taxcloud only supported a small handful of shopping carts (6 carts) a year after this paper.  Six!!
  • Taxcloud didn’t and doesn’t support the 3 platforms they identify as the largest (Ebay, Amazon, Yahoo)
  • Taxcloud still has significant gaps in even the shopping carts and platforms supported.
  • Let others figure out how to implement it – Just pass the bill!

Taxcloud: “People also used to say that the world was flat – but that did not make it true.”

  • Made demonstrably false claims about their capabilities while supporting just 1/10 top ten shopping carts in a letter to the Governor of Maine in 2012.

“Any retailer that uses an online “shopping cart” or order management system can register with our
service and be ready to collect sales tax in 20 minutes (or less), no matter how small they are.”

Nope, utter rubbish, AKA a lie.  If you want to read more, Taxcloud has their own category here.

Back to the letter

“And as long as Congress fails to act on the matter, online retailers face growing confusion and vulnerabilities in the face of rapidly changing state laws. California, New York, Pennsylvania, Oklahoma, Texas, Colorado, and many more states have been advancing variously constructed laws and administrative stratagems to require sales tax collection by remote retailers, who are ill-equipped to sort through such demands or judge their legitimacy. As Congress continues to refuse to act, states are drawing the conclusion that they are on their own, and the trend of singular state actions continues and is likely to intensify.”

So passing the horribly flawed MFA is just to help save us?  “We destroyed the village to save it” kind of thing?  Just because some states feel like they can pass a law that is unconstitutional and will never pass muster, that’s no excuse to try and ram through this terrible bill.  Those kinds of issues are pretty low on most retailers’ radar and generally have been overturned.

More importantly, MFA does nothing to solve this!

  • MFA only applies to 24 SSUTA member states and frankly, many of them are smaller states.  Update: Only 33% of U.S. population covered by Streamlined states (source Wikipedia/ 2010 US Census).

Many key states like California, New York, Pennsylvania, Texas and Colorado are NOT streamlined states and would not be able to collect tax under MFA without major changes to their laws, which would require legislation and likely take years to happen, IF they wanted to.  So MFA doesn’t even solve this issue for 5 of 6 states he lists.   

  • MFA only applies to businesses with $1 million or more in remote sales.  Smaller?  MFA does nothing to solve this for you!

 “The amount of uncertainty around sales tax law is unsustainable”

No, not really.  We’re quite OK without MFA, thanks.

“It is especially burdensome for retailers who sell through multiple channels, from online to mail order to phone”

Which are things Taxcloud is unable to support – Major cognitive dissonance here.  None of these things can be supported by Taxcloud for us, or anyone that we know.  They don’t support Amazon, Ebay, our order processing software or mail order catalog’s concerns.

“We urge you to meet your responsibility to online as well as local businesses by ensuring e-fairness legislation is enacted this year. This very achievable step would provide welcome relief to small businesses across the country.”

Relief how?  Because it used to be about fairness and a level playing field.  This “fairness” is of course a myth when proponents claim anywhere from 96% to 99% won’t be affected by the MFA.  Which also means the relief wouldn’t happen at all with this law.   Why relief won’t happen:

  • Smaller retailers will still not collect sales tax, Main St. brick and mortars will have gained nothing.
  • Online retailers below $1 million would not be spared this “unsustainable sales tax environment” since they’d be exempt from the MFA
  • Online retailers over $1 million would not be spared this “unsustainable sales tax environment” either, since most important states wouldn’t be affected by MFA for a very long time.
  • Online retailers over $1 million WOULD be hammered by new compliance obligations, compliance costs, audit risks and trying to comply with a massive state overreach for SSUTA states almost immediately upon passage.
  • Taxcloud would make a ton of money.  Which is why they continue to spin out new and ridiculous (sometimes false) statements as to why Congress should pass MFA so he can finally cash in.


If Congress must and is really serious about the issue, the Judiciary released a set of principles for a fair method of collecting taxes.  This was released in October 2013 (13 months or so ago at the time of this writing) and proponents have done absolutely nothing with them.  The only way forward to meet these fairness principles is to scrap MFA completely and start over and with some meaningful and REAL simplification, like 1 sales tax rate per state for remote collection.  But then you won’t need someone like Taxcloud.

Marketplace Fairness Act Myth: “Level Playing Field”

One of the focus group-tested themes by the pro-Marketplace Fairness Act groups is that they are pushing for a “level playing field”.  How noble of Wal-mart, Best Buy, Amazon and others to push for small businesses to be on a level playing field.   Which of course, is nonsense on many levels.

Why Efairness/MFA undeniably won’t create a level playing field:

  •  $1 Million Small Business Exemption – there will always be a steady stream of smaller retailers with products for sale without tax.
  • Cheaters – Many people selling through Amazon or Ebay that should collect sales tax don’t.  This won’t change.
  • Foreign Sellers – Will not be bound by the MFA.  I’m seeing more foreign sellers through Amazon than ever, especially from Japan & China.
  •  “99% of businesses won’t be affected by MFA”   What’s so funny is the cognitive dissonance of proponents who try and minimize the impact of the MFA on businesses.    If actually true, it means only 1% of the stores would start collecting sales tax, so that won’t help “Main Street” businesses at all.

The flip side of a level playing field is the tired argument that MFA would equalize online and brick and mortar retailers.  Phrases like “online-only sellers should collect sales tax from dollar 1, just like he must”.  Again, nonsense.

  • Online retailers do collect sales tax “from dollar 1” where they have a physical presence, just like traditional retailers.
  • MFA would bury smaller online retailers under a blizzard of audits and collection burdens that don’t exist offline
  • Can a small brick and mortar face audits and compliance costs for 46 states?  No.
  • Can a small brick and mortar be an unpaid tax collector for 46 states?  No.

So get over this rubbish that the Marketplace Fairness Act has anything to do with fairness.  It absolutely doesn’t.  Nor do Wal-mart and the other supporters care.  It’s just the shameless talking points to evoke an emotional response to an issue, to paper over horribly designed legislation that won’t actually do anything for fairness anyway.

UPDATE: Part 2 covers why the MFA is even LESS able to creae a level playing field.  Only 33% of the population lives in streamlined states that will be affected by MFA.  2/3 of the US doesn’t.


Seattle Times editorial complaining about Speaker Boehner & MFA

“Editorial: If John Boehner kills the Marketplace Fairness Act, it would hurt Washington state”

“U.S. House Speaker John Boehner’spromise this week to kill the Marketplace Fairness Act is a kick in the gut to Washington state.

The measure would empower all states to collect sales taxes for online transactions from residents who make purchases from out-of-state companies.”

False.  Washington already has the ability to collect use tax from its citizens.  A new law is not needed.  Political will is needed.  If you want the money that badly, make the unpopular choice: educate and enforce existing use tax laws.

“Here in Washington, state revenue officials estimate the act would funnel $217 million in new revenue for local municipalities and $478 million for the state in the 2015-2017 biennium. The $695 million total would rise to $889 million by 2019-2021.”

Unlikely.  States cling to these inflated numbers from years ago that have been shown to have been wildly overstated.

“This additional revenue is important for a state that doesn’t levy an income tax and relies predominantly on retail sales, property and business and occupation taxes for its funding.”

Feel free to change that flawed option on your citizens if it’s not serving your state’s needs.  More importantly, Washington DOR taxable sales reports show strong growth in sales tax revenue, from 5% to 7%.  Is it ever enough?

Q2 2014 30,973,320,923 almost 7% growth year over year – most recent figure available
Q2 2013 $29,025,169,986

2013 annual 117,200,523,189 More than 7% growth over 2012
2012 annual 109,053,732,448 More than 5% growth over 2011
2011 annual 103,740,825,097

“But Boehner has consistently expressed concerns about the bill, aligning himself with the anti-tax fervor that has increasingly transfixed congressional Republicans.”

No, he’s thoughtfully holding off on the MFA.  Why do supporters need to pull circus stunts like trying to attach the legislation to other popular legislation? Or trying to cram it through in a lame duck session? It’s because the Marketplace Fairness Act is deeply flawed legislation that according to Taxcloud (1/6 certified tax providers if the MFA passes) could ensnare up to 3.5 million retailers in compliance costs and audit risks from 45 more states.

And why have proponents not done anything in the last 13 months since the House Judiciary came out with its principles regarding what would constitute a fair and balanced approach? Proponents don’t care. Most of the money is coming from big box retailers who would be happy to wound or crush smaller online rivals with this bill.

How about focusing on fixing the very real and serious flaws in the MFA. Then maybe you wouldn’t have to pull legislative stunts to try and pass it.


Taxcloud abusing DMCA takedowns – The video they don’t want you to see

Taxcloud, and/or proponents of the Marketplace Fairness Act must be very embarrassed about the contents of their business pitch video.  This 90 second video sums up their company, their business plan and how large the market opportunity is.  Proponents have paid for studies with laughably low estimates of the number of retailers that would be ensnared by the Marketplace Fairness Act.  They’ve consistently soft pedaled how many would actually be affected.  I’ve heard numbers in the low hundreds to a thousand or so be routinely thrown around as fact.  You know they’ve been using this same lie with legislators as well.

Their video states the market is 350,000 to 3.5 million retailers.  Oops!  That doesn’t fit the narrative of less than 1000 at all.

R. David L. Campbell is a founder and CEO of Fedtax, AKA Taxcloud.  He has been attempting to quash a video from being shown through this site.  He has fired off a number of DMCA takedown requests against my 19 second snippet of the video, which is clearly fair use in this context.   The video has been pulled from Youtube and Vimeo.  His takedown requests of this short excerpt are illegal and an attempt to silence a critic and hide an embarrassing truth.

What’s amusing, is that this video was put on Vimeo by Taxcloud and has been publicly viewable for a very long time.  It only became an issue when my article called out what I feel is a closer estimate to how many retailers will be harmed by this and showed the same video.

In case you missed it, here’s the relevant section of their video that they REALLY don’t want you to see (at least, anymore):





Pinned Post – MFA’s (AKA MITFA) Vast Impact

A couple of our blog post that summarize the vast, and perhaps unintended reach of the Marketplace Fairness Act on businesses.

First, a post about how wholesalers, manufacturers and other non-retailers will be affected by new compliance burdens and audit risks (and if they sell retail, they’ll be just as affected as us)

The MFA impact on Manufacturers, Distributors & Wholesalers – A Huge Swath of the Economy Will Be Affected

Second, a post regarding Taxcloud’s statement regarding the number of businesses that will be impacted by this legislation – It’s a HUGE number and way more than the proponents have tried to sell in the past.  Ridiculous numbers like 1000 retailers.

Taxcloud is 1 of 6 Certified Service Providers for the Streamlined States and a huge proponent of the bill, since they’d make many millions of dollars if MITFA or Marketplace Fairness Act passed.

Taxcloud Video – Up to 3.5 Million Retailers Will Be Impacted by MFA/MITFA

Economically – MFA or MITFA is a New Tax

Is it a new tax?  From an economic perspective, it absolutely is.

The Marketplace Fairness Act/MFA/MITFA – whatever incarnation you call it, will collect use tax from consumers on remote sales that wasn’t collected before.  Do use tax laws already exist?  Yes.  It’s the states jobs to collect them from their citizens and they mostly don’t on consumer purchases.

  • From an economic perspective, it doesn’t matter if the law existed or not
  • The real-world economic effects are that dollars are coming out of the consumers wallets that didn’t before
  • Even Pro-MFA’s Laffer’s tortured theories support this assertion (re: “states need to spend this money wisely”)
  • Consumers will have less money to spend
  • These new tax revenues will go to the states/localities
  • The vast majority of states won’t cut taxes by an offsetting amount
  • And the converse of Laffer’s theory – without matching tax cuts: job losses & economic harm, not growth.

You can debate all you want about if the MFA is just enforcing existing law, it really doesn’t matter.  To an economist, or a consumer, it’s a new tax.  Those dollars aren’t created by the tooth fairy.  It’s a direct transfer from consumers wallets to states’ coffers.


Hypocritical Stand with Main Street Small Biz Examples

There seems to be some serious cognitive dissonance with the small businesses trotted out lately by Stand with Main Street and 21st Century Retail – the main power PR companies behind Pro-MFA forces.

Many to MOST of the small businesses they trot out lately have an online retail store as well and DO NOT CHARGE TAX outside of their home state.

A recent PR piece (I mean commentary, probably written or mostly written by someone else) signed by 4 store owners.  3 of them have online stores and don’t charge tax outside their state.

The most recent Stand with Main St. Vine Tweet – They sell online too.

Do they not get how hypocritical this is?  Are their online presences small enough to be under the minimum (and exempt from the MFA)?  Probably.

Complaints that there is not a level playing field, while doing the same thing.  Looks level to me.  And for those who don’t have a small online store… why not?  Nothing stopping you for most retail industries.






Accounting Web Article – Interesting Quotes

In a recent article in AccountingWeb “New Bill May Change the Sales Tax System” there’s a few interesting comments/whoppers.

First, a whopper from the founder of Exactor, one of the 6 CSPs that will make millions if the Marketplace Fairness Act passes.

“”E-commerce has reached maturity and there’s no reason we should treat it as some sort of start-up that needs additional incentives,” says Barsade, an attorney who specializes in taxation and technology.”

Actually, no special treatment exists now.    Due to well established law and 2 Supreme Court decisions, states can’t impose collection responsibilities on companies that don’t have presence in their state (Nexus).  The implication that E-commerce is receiving special incentives is completely false.  This has been the case for many decades with catalogs and other remote sellers.  MFA would dramatically change existing law, Federalism and the ability of states to reach across their borders and impose their rules on a business that has no presence and no representation.

“And for CPAs and tax attorneys, the legislation would expand their scope of business and be a business aid, he says. “It will insert a level of certainty and sanity to the environment.””

Great!  Legislation that will increase business for CPAs and tax attorneys – that doesn’t sound scary for affected remote retailers at all!

Self Serving Post by Exactor – Phew it’s easy!

It actually is easy, because they don’t support our setup (and ours isn’t very exotic at all).  Voila!  Problem not solved.

(Update: Exactor confirmed no “plug-in” available for our shopping cart which powers tens of thousands of e-commerce sites)

This new Wired Innovation Insights post is a press release masquerading as insight.

I’m getting deja vu a bit on this – but thank heavens the founder and President of a tax company and CSP states that it’s easy to comply with the Marketplace Fairness Act.  It’s just a happy convenience that his company will make millions of dollars on that 8% of sales tax collected, while we become unpaid tax agents for 46 states.

Similar to an Avalara post early on this the history of this blog – is it easy?  Or hard?

According to the blog post, it’s easy!

“Since then, innovators have made cost-efficient, automated solutions to address this burden. Those who use the “undue burden rationale” as justification for opposing sales taxes on ecommerce are either still living in 1992, or they are just trying to take advantage of the legal uncertainties that emerged from the rapid growth of the Internet. “

Nice false choice.  We’re either clueless idiots or cheats.  BTW, there is no “legal uncertainty”.  If you’re a small business located in one state and you sell online to a customer in another you don’t need to collect that states use tax on behalf of that state, if one exists.  He continues to dig:

“An online merchant selling in all 10,000 jurisdictions can comply with sales taxes just as easily as a brick-and-mortar business selling in one jurisdiction.”

BS.  Horse hockey.  (I cleaned up the first word I wrote down)  Can I be more clear?  A huge whopper.  Read any/all of the posts on this site for the whole range of complexities, costs, audit concerns… Total BS.

“Ecommerce businesses exist in the physical world and benefit from taxpayer funding. Without roads, postal systems, governments, telephone wires and fiber optic cables, Amazon is not much of a business.”

Last I checked, e-commerce sites and brick & mortars who also sell online are everywhere.  Gas taxes are paid, so is postage, local taxes… by businesses and individuals.  And Amazon has ramped up their physical presence so much, they’re collecting sales tax for about 70% of the population so far.

“If the lobbying dollars shelled out by Amazon are any indication, they have representation. Now it’s time for taxation.”

Pot calling kettle black?  It’s fairly easy to see where the vast majority of the lobbying dollars comes from on the bill.  It’s almost entirely pro-MFA and paid for by Wal-mart and other big box retailers who are flooding Washington with dollars to pass a bill sponsored by Wal-mart Womack – coincidentally the representative for Wal-mart’s home offices.  And Amazon supports the MFA.  The statement above is both clueless and incorrect.

Or… Is it hard?

Fox Business piece November 2013

Let’s take a look at their website:

It’s not a good sign when “simple” requires a suite.  (Or when I try and look at a “satisfied client” account and they apparently went out of business)



Exacto-Trac.. and more.

Let’s look just at Exacto Calc.

“The EXACTOCALC module can be easily and seamlessly integrated into any business and transaction platform where real time calculation is required, eCommerce shopping carts, accounting programs, ERP systems. Exactor’s automated wizards provide automated integration into many systems, and its SDK provides easy integration into more customized environments.”

An SDK is lovely and all, but how many small businesses have the ability to handle this, or the costs of this custom programming work?  Virtually none.  I don’t, and I’m reasonably technical.  And some systems just can’t connect.

“The plug-in wizards work just like any other plug-in that you may have installed with any windows based software. You will save the plug-in to your computer, and then double click on it. The wizard will then automatically install the files and load the Exactor module. Once installed, the user will need to configure the module (for example adding the Exactor account information, mapping their products). A detailed User Guide is available to walk you through the process of installing and using each plug-in.”

That doesn’t sound particularly easy.  Far more importantly, it would not appear to support our hosted shopping cart.  The cart is the tip of the sales tax iceberg and it doesn’t appear to even support that.  Or, our order processing software.  Or our phone orders.  Or our Amazon sales.  Or any other channel.  And why do I need a detailed user guide?  And it sounds like I’ll have to get cracking on mapping my products, that sounds time consuming.  What if I don’t classify a product correctly, who is responsible in an audit in the newly added 45 states.  Why I am, of course.

More on their SDK makes it sound even easier.

“Briefly, the basic concept is that the merchant system calls out to our system to post sales transactions and get back the tax amounts. The method of communication is a simple HTTP POST request, where you send an XML payload (using the Exactor XML schema) containing the transaction data and receive an XML response that contains the tax data. At the end of each period, we automatically generate the returns for all of the states where there are obligations. You can have multiple points of integration where Exactor touches the transaction, such as at the order management system or the Shopping Cart level; the system Invoice level, or bulk uploads etc.”

Yet again, another CSP pushing the Marketplace Fairness Act with hypothetical processes that make all this as easy as clicking a button.  It’s still false for almost all who would be affected by the MFA.

When “free” isn’t free

Taxcloud finally did get around to supporting Yahoo carts, one of the top shopping carts used online.

Kind of.  And not exactly free.

It’s actually irrelevant to us at this point if they support it or not, as they don’t support the primary place anything related to sales tax actually occurs: our order processing software.  As mentioned before in other posts, the shopping cart is the mere tip of the iceberg of actual business processes that relate to sales tax.  Processing orders, changing prices, returning all or some of an order…

They worked with a third party developer to help, but the third party does charge a monthly fee for the integration.