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

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

How many businesses might be ensnared by the Marketplace Fairness Act/MITFA?  Way more than most might guess.

350,000 – 3,500,000 retailers is their market – according to this elevator pitch 90 second video regarding Taxcloud’s business prospects from October 2011.  Taxcloud is 1 of 6 certified service providers (CSPs) who will see a windfall in new business if the MFA/MITFA passes.

Actually the phrase was “350,000 to 3.5 million retailers will be impacted by the new law”.  And “suggesting an opportunity of 1.3 billion dollars for Fedtax.”

They’re embarrassed enough by this FAIR USE 19 second snippet of the whole video that they’ve repeatedly filed frivolous DMCA notices to pull down the video.  This copy is in Iceland – good luck with taking this one down.  Transcript down below too.

US Vimeo – back up.

 

I doubt this includes true wholesaler/manufacturers as someone who only has exempt transactions wouldn’t be someone that would generate revenues for them.  More businesses might be impacted even than this number.  Not sure if this estimate includes a $1 million dollar small business exemption or a lower one – or a much lower one like the pro-side plans on moving to anyway down the road.  Boil the frog slowly!

So is it puffery?  The real truth about how many would be impacted by the Marketplace Fairness Act’s unprecedented expansion of states powers to reach across their borders?  Somewhere in-between?   I hope not to find out.

Proponents have tried to soft pedal with completely unbelievably small numbers how many will be affected by the Marketplace Fairness Act.   I believe these numbers have embarrassed the pro-side and they’re freaking out.  Sadly, I do believe the numbers.

 

Taxcloud Pitch – UPDATE: TAXCLOUD PULLED THE VIDEO (10/25/14).  I’ll get a copy up soon and the transcript is below.

Update 2: 11/1/2014 – Taxcloud filed a DMCA takedown notice against the video.  I hope to have it up very shortly and won’t be silenced by the attempts. Transcript below anyway.

Update 3: 11/1/2014 – Created new video – Less than 20 second excerpt of the video that specifically leads up to the topic and states the number.  This video is absolutely covered by fair use.  §512(f) provides very severe penalties for those who knowingly file false DMCA notices. See also Open Policy Group v. Diebold.

Update 4: 11/2/14 – and of course, Fedtax/Taxcloud again failed a DMCA claim, clearly frivolous.

 

Addendum: transcript of the whole video

David: You would have to be living under a rock to not have noticed the state of California dispute with Amazon.com about collecting sales tax on online purchases and the fight is underway in other states as well.

Daniela: And this fight is underway in other states as well even in Connecticut and the numbers add up quickly over 23 billion dollars.

Joan: Over 23 billion dollars uncollected every year. Online retailers don’t collect sales tax today because 44 years ago the Supreme Court said it was too difficult.

Carl: Too difficult for remote retailers then mailer catalogs to keep track of every jurisdiction across the country.

Erin: No one would disagree that a lot has changed since then. That’s where Tax Cloud comes in.

Leslie: TaxCloud calculates sales tax for every address.

Paul: Every address across the country in under 13 milliseconds. And we also prepare and submit returns, submit proceeds and even…

Chris: Even respond to audits. And we do all of this for free.

Erin: Free.

Joan: Free.

Chris: We can offer TaxCloud for free for two reasons. One, we are paid by the states to provide the service and two, we have an extremely low operating cost made possible by our cloud computing infrastructure.

David: Now the fight in California has moved to Washington, DC.

Paul: Federal legislation has been introduced that would compel online retailers to collect sales tax.

Joan: Just like local retailers have to do. Between 350,000….

Daniela: … and 3.5 million retailers will be impacted by the new law suggesting in the annual opportunity of over 1.3 billion dollars for Fed Tax.

Other locations:

Also on Vimeo (now pulled via DMCA too)

Locally

Award-Winning Astroturf Part 2 – DDC Advocacy (Stand with Main St.)

So sorry I missed a prestigious award for DDC Advocacy this February 2014.  DDC Advocacy (Stand with Main Street/Alliance for Main Street Fairness won an award as well this year!  The join their partner in astroturf Finn Partners.

DDC Advocacy Wins Prestigious Reed Award – Best Public Affairs Campaign of 2013

From their Press Release

“DDC Advocacy (DDCA), a leading full-service international public affairs firm, was awarded the Reed Award for “Best Overall Public Affairs Campaign of 2013″ by Campaigns & Elections. The award recognizes their work to condition the federal and state legislative environment for sales tax parity state-by-state.”

and

“DDC Advocacy launched a public affairs campaign to shed light on online-only retailers who have exploited a sales tax loophole that pre-dates the Internet and provides them with an unfair advantage over brick-and-mortar stores.”

Yes, out of the goodness of their heart DDC Advocacy launched a public affairs campaign against that “sales tax loophole” AKA many decades of settled law and Supreme Court decisions.  Oh wait, they were paid?  By big box retailers?  That makes more sense.

Just so we’re clear who the folks with the charming campaign are:

DDC Advocacy (DDCA), the leader in issue advocacy since 1996, is a full-service public affairs advocacy firm executing custom-designed engagement programs and campaigns for government, non-profit, association and corporate clients. We leverage our company’s extensive capabilities, leading technology tools and strategic expertise to achieve winning results for clients, impact policy and shape public debate. Among our comprehensive suite of services and products, DDCA offers advocacy strategy, global and local in-district campaigns, digital engagement targeting, outreach tools, grassroots technology, PAC compliance, public relations, social media, and government services.”

Grassroots technology?  Sounds like Astroturf to me!

I certainly hadn’t heard of Campaigns & Elections before.  Here’s their blurb about themselves:

Campaigns & Elections is the preeminent “how-to” journal of politics, focused on the tools, tactics and techniques of the political consulting profession.”

Again, as grass roots as it gets!

 

 

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 hill.com 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!

Heaven Forbid Proponents Actually Try and Fix MFA

Rather than trying to address the real flaws thoughtfully addressed by the House Judiciary, the Senate is trying to hijack popular legislation by tacking the MFA to it.  Either you pass the anti-Internet tax bill while simultaneously raising everyone’s taxes on many remote purchases, or the current moratorium expires.  A really awful tactic and unfortunately not in any way surprising given the large number of dollars Wal-mart and other big box retailers are pouring into this fight.

Our post on these statements from September 2013:

House Judiciary Committee Releases Principles on Internet Sales Tax

Some of the proponents quotes:

From the Marketplace Fairness Coalition: “It’s clear that Chairman Goodlatte is committed, as are many in Congress, to finally addressing this critical issue and leveling the playing field for all American businesses. The release of these principles will be a great first step in the House of Representatives towards closing the online loophole and restoring basic free market competition.”

National Retail Federation: ““These principles will serve as a legislative roadmap for advancing sales tax fairness legislation in the House of Representatives, and demonstrate that Congress is listening to the pleas of local, community retailers and merchants, who continue to face an unfair competitive disadvantage with their online competitors,” commented senior v-p of government relations David French. He also said that the group looked forward to providing critical feedback to the Committee and to participate in legislative hearings as the debate on Internet tax bills move forward.”

Clearly, the principles were a massive setback for the pro-MFA forces.  So have they reworked the bill, or made attempts to modify the SSUTA, or in ANY way change their approach?  Of course not.

There are clearly fundamental problems and unfairness in the Marketplace Fairness Act.  Instead of fixing the problems, they’re just trying to ram it through by attaching it other legislation.  Or piggyback it onto something called MITFA instead.  It’s the exact same bill with no modifications to address the issues.

 

Orwellian Double-speak – Cubed!

(Orwellian Double-speak)^3

Leave it to the extremely well-funded, big-box retailer backed “Alliance for Main Street” Fairness to take double speak to an entirely new level.

The Marketplace Fairness Act itself is another layer of it – Any act with fairness in the title usually isn’t.

To take it to yet another level – “Doublespeak-cubed” as I call it is an absolutely shameful legislative trick being used by the Senate to try and attach the MFA to existing legislation and pass it along with popular legislation.

Last week, the U.S. House of Representatives passed the Internet Tax Fairness Act (ITFA) by a nearly unanimous vote. The ITFA protects the Internet from usage and access taxes (and has nothing to do with sales tax). Unless the ITFA passes by November, Internet access including email could be taxed.

When this bill went to the Senate for a vote, instead of voting on this clean, non-controversial bill, Senate leadership attached the controversial and unpopular Marketplace Fairness Act (MFA) to the bill and announced that unless the House passes the Senate’s version of ITFA with the MFA attached, that taxation of Internet access would commence.

Orwell-cubed is just the fact that the Senate would attach a sales taxation of online sales bill to another bill that would block Internet taxation. I would laugh at the irony if the MFA weren’t such horrific legislation and a small business killer.

There are many reasons why the MFA stalled in the House Judiciary and never made it for a vote. MFA is fundamentally flawed legislation as-is. The head of the House Judiciary, Chairman Goodlatte, published a set of principles that he and their committee would look for in any MFA-like bill. In my opinion, MFA meets none of these. The opposition politely thanked the committee for their thoughtful deliberation and looked forward to addressing the Judiciary’s concerns regarding the legislation.

But instead of actually trying to address the legitimate concerns of tens of thousands of businesses that would be hit by this new regulatory and financial burden, the Senate leadership at the behest of their big-box retail donors is trying to bypass the whole process and the House of Representatives completely by attaching the controversial and unpopular Marketplace Fairness Act to the ITFA. So passing ITFA will continue a freeze on Internet access taxes, while implementing new sales taxes on consumers.

“War is peace

Freedom is slavery

Ignorance is strength”

“Doublethink means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them.”

And now “I voted against Internet taxes while voting for them”

Poll: Internet Retailer List Misses 90+% of Emainstreet Eligible Members

In response to the ridiculous SBA advocacy office report “An Analysis of Internet Sales Taxation and the Smaller Seller Exemption (SSE)” that grossly understates the number of online retailers that would be affected by the Marketplace Fairness Act, I decided to poll the membership of Emainstreet.org’s members.

This poll shows that just with regard to traditional websites, this SBA report probably underestimates the number of remote sellers by an order of magnitude, and this doesn’t include Amazon sellers, Ebay sellers or other remote sellers under the MFA.

Unlike pro-MFA “polls” (and I use the word loosely) with unknown and never-shared questions or methodology, I’m going to share.  The goal of the poll was to get anonymous, real answers without fear of sharing critical business sales data.  So I made the poll anonymous, only 2 questions, and password protected on a hidden link that was emailed to the member list.  The Emainstreet list was emailed this very simple poll.  We received 116 responses.  Here’s the poll:

Question 1: What were your 2012 gross sales?

  • Less than $100,000
  • Between $100k and $500k
  • Between $500k and $750k
  • Between $750k and $1 million
  • Between $1 million and $2 million
  • Between $2 million and $3 million
  • Between $4 million and $5 million
  • Between $5 million and $10 million
  • Between $10 million and $20 million
  • Greater than $20 million

Question 2: Were you listed in the Internet Retailer top 500 or top 1000 list for 2012?

  • Yes
  • No
  • Not sure

I put “not sure” into the poll, just to make sure there was an answer, but it’s probably not a relevant choice for the purpose.  A number who answered not sure are below the list’s requirements anyway.  And those who were large enough to be on the IR 1000 list, probably aren’t on the list based on the responses we saw.  Also, if you’re on the list, you would probably know.  You will be hearing from sales calls about it and perhaps even patent trolls.  Realistically, the “not sure” votes are probably all not on the list.  (There were 9 “not sure”).

Results:

78 had sales of $500,000 or higher, enough to qualify for the bottom of the Internet Retailer 1000 list.

Only 7 actually were on the list.  Seven.  Out of 78.

In other words, according to our poll, only about 9% of our Emainstreet members who could be on the list, are on the list. ($500k+).  Or another way of looking at it, just in our poll results alone, 71 companies aren’t being counted.

 Why does it matter?  Because an economist writing a paper for the SBA advocacy office on the impact of small business exemption levels in the MFA used the IR 1000 list as the PRIMARY data source for who might be affected.

The methodology is utterly and completely flawed and this ridiculously flawed paper is being used by pro-MFA forces and to shape public policy based on false data that understates the actual number of businesses affected by probably a factor of 30 or more.  That’s why it matters.  I’d suggest the SBA get their $80,000 back, but the goal of the SBA appeared to be to support the Marketplace Fairness Act, not actually honestly measure the impact on tens of thousands of remote sellers.

Why is the Internet Retailer such a terrible data source?  (And why would I fail an economics student who used it as their main data source for a school report?)  Because it’s mostly self-reported with a healthy dose of IR estimates for larger companies – AKA guesses.

  • Online retailers generally don’t want to share their sales numbers and other key metrics.  It shares those key figures to the world, to your competitors, future competitors and patent trolls.  The top retailers in the list are all public companies who have no choice but to share their sales figures publicly.  Lower down the list, they generally are not public companies.
  • Amazon sellers are NOT included or eligible for the list.  There are many Amazon sellers that sell more than $500k per year, I probably know a few dozen in my industry off-hand.
  • Ebay sellers are NOT included or eligible for the list.

116 respondents is certainly an acceptable sample size to extrapolate out the percentage of other online websites not being on the IR 1000 list.  This poll shows that just with regard to traditional websites, this paper probably underestimates the number of remote sellers by an order of magnitude.

I’ll continue our analysis of the flawed SBA paper shortly, now that our Q4 retail season has passed.

Politico Article – “The Big Muscle Behind MFA”

Who is really behind the “Alliance for Main Street Fairness” AKA Stand with Main St. – just confirmed a bit more clearly in a recent Politico Post.  Yes, they all are big proponents of small businesses.

“Retail giants such as Amazon, Best Buy, Target, and Wal-Mart — the big muscle behind the pro-online sales tax movement — are all members of the Alliance for Main Street Fairness.”

 

3.5 Million Remote Retailers? – The MFA Trojan Horse

In a public summary to potential investors, Fedtax/Taxcloud reveals some pretty interesting details about the business of being a CSP and the business they think it can be.

“We expect a tidal wave of new business once federal legislation passes, as merchants and e-commerce platforms alike look for the best way to comply with new sales tax guidelines”

“To best reach our market of approximately 3.5 million remote retailers”

3.5 million remote retailers?  The truth comes out, or perhaps a huge estimate for an audience of potential investors?  I can only guess that this is based on no small business exemption.  I do believe Taxcloud would be in favor of signing up lemonade stands if they sold remotely.  No idea on the methodology used for this market number.

It’s refreshing, but completely counter to the Pro-Marketplace Fairness Act supporter’s numbers.  Some have put the number as affected retailers as under 1000 (which was laughable).  An independent study puts it more like 30,000 in 2008.

So is the MFA, as-pitched, just the Trojan horse of shrinking or eliminating the small business exemption?  Maybe.  If it were up to the states and tax companies – it sure would be.

Time to sound the alarm to ALL small businesses who in any way sell remotely.  You are ALL part of the “market”.  Don’t think you’re OK because of the current small business exemption in the legislation.  There are active talks about lowering or removing it.  You will have to deal with all the audit risks, headaches, integration issues…. too!