Cow Pie with a bow on it! – “Remote Transaction Parity Act” MFA 2.0

Again, with the names of bills that mean the exact opposite.  MFA 2.0.

First, the Marketplace Fairness Act – which would never create fairness for anyone (well covered on this blog)

Now, after yet another year of defeat, it’s time to rebrand!  Why bother to truly start over and address the House Judiciary’s fairness principles from 14 months ago or learn from your mistakes as to why this terrible bill met resistance.  Let’s put a bow on this cow pie of a bill instead!

According to this article, MFA 2.0 will be called the “Remote Transaction Parity Act”.  Which of course means it won’t have any parity between “brick and mortar” and remote sellers of any kind.  It sounds like the overall approach is unchanged and proponents have made a tweak or two for window dressing.  So they put a bow on the cow pie.

Will “brick and mortar” sellers have to:

  • Deal with 46 states tax rules?
  • 9600 tax jurisdictions?
  • Be exposed to audits from 45 more states than before?

Of course not.  So of course this bill has nothing to do with “Parity”.  The name probably focus tested well.

“I think it will be very palatable to both sides of the aisle,” Chaffetz told Tax Analysts following the meeting. “It really clarifies a number of things that people thought were wrong with the MFA. It just makes it a better bill.”

I don’t need clarification.  Frankly, I and some other opponents have forgotten more about the legal and implementation details than most proponents or legislators have ever known or imagined.  Small store owners are a detail oriented and pragmatic group who have probably done about every job in their company at some point.  WE get the details.  THEY don’t.

The entire fundamental approach to the MFA is flawed, needlessly complex and will lead to unacceptable compliance costs, burdens and audit risks.

“”How many more retail obituaries are we going to have to read before we, Congress, recognize pursuant to what the Supreme Court said in 1992 that we are the only institution that can intercede on the issue and issued us an engraved invitation to fix the problem,” Womack asked.” (Rep for Wal-mart’s district, major funder of the bill)

We will have the same number of local retail obituaries with or without this bill.  Perhaps more when smaller online retailers using the Internet to try and grow a business get wiped out by this train wreck.

“”If any small business had a concern about MFA, this will take away their concerns,” Osten said. There is language in the draft bill that would reduce the burden of audits on small businesses, Osten said.”

Horse hockey.  I call BS.  The previous MFA bill is only 8 pages.  Much of it refers to the Streamlined States document, which is hundreds of pages and is what really defines much of the law.  Audits are certainly a prime concern, but there’s just no way a tweak to the bill will remove this threat.  And audits is just one of many major, fundamental problems with the bill.

“”The new bill that Congressman Chaffetz has will indeed respond to the principles raised by Chairman Goodlatte and should respond to all of the concerns the House Republican leadership has raised about the MFA bill.””

More horse hockey.  MFA was fundamentally incompatible with the Judiciary statements.  If it were so easy to tweak MFA to address the concerns, why did proponents wait 14 months?  Because MFA was never going to pass muster.

As an added bonus, our favorite Pro-MFA huckster David Campbell of Taxcloud is in the mix yet again!  Somehow he managed to be clairvoyant and register the domain name RemoteTransactionParity.com in June, almost 6 months ago before this announcement.  It shows how cozy the CSPs, especially rent-seeking Taxcloud, are with pro-forces and legislators.  Of course, he will stand to make millions should MFA 2.0 pass.

“Is it possible that Rep Chaffetz office leaked the bill to the Certified Software providers before even letting anyone else see it? Is it possible that David Campbell and other CSPs are actually writing the bill? They sure are cozy!  And we’ve seen with our simultaneous Twitter blocking from all pro-accounts, they do work together.  Perhaps Mike Jerman (who is spearheading this legislation in Chaffetz office) should listen to all parties instead of just the party who stands to make millions if this passes.”

 

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

Summary:

  • 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.

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

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

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.

Sten Part 2 – The Sweet Irony

The bot-like dedication of Sten continues.  His unswerving devotion to the MFA and Taxcloud continues and yes, he continues to post demonstrable false lies about the issue and quickly runs away or changes the subject when confronted.  But this new twist is hysterical.

Sten’s site no longer sells their wool products at all on their site.  Now they have an Etsy site for all of their online selling (as tiny as it may be).

  • Taxcloud doesn’t support Etsy carts (welcome to our world Sten)
  • He doesn’t collect sales tax for streamlined states anymore
  • Still doesn’t collect for other states, despite his fervor that we all should for all states
  • His sales tax policy statement on his site isn’t followed anymore.

 

Sten Wilson

Who is he?  Why does he post all over the place for the last few years regarding any article concerning the Marketplace Fairness Act.  Is he a sock puppet?  A paid shill (A shill, also called a plant or a stooge, is a person who publicly helps a person or organization without disclosing that they have a close relationship with the person or organization.) – Wikipedia.

Or is he just a dedicated (OK, kool-aid-drinking, very enthusiastic proponent of the MFA) advocate?  His posts are legendary among store owners who follow the issue.  The long, rambling posts.  Statements like “There are no burdens for Internet retailers”.  The awkward, stilted language repeating the same phrases over and over.  Completely ignoring inconvenient points brought up in replies.  They just aren’t how most people write or talk.  Cynical me certainly jumped to shill.  Especially with all the fake PR fronts for big business in the campaign for this bill.  If I see grass, it’s astroturf with regards to the MFA.

What he’s publicly stated:

  • Runs a small sheep farm in upstate New York.
  • Less than $50,000 per year in revenue (2 yr. old post) w/ very simple website & paypal express.  He’s well under any MFA limits.
  • Uses Taxcloud and is happy with it.  Repeatedly references this fact.
  • Has stated he does not work for Taxcloud.  Certainly copies and pastes a lot.
  • Stated conservative
  • “I am not a lobbyist”
  • List his status as free-lancer, self employed on Linked-in and 2009-present as “advocate”

Sten gets around.  Not just in his posts.  What led to this blog post was yet another discovery of a place he went to for the MFA.

He went to Washington D.C. to share his support with Senator Enzi

He attended the 10/2011  SSTGB Governing Board meeting in Seattle.

Is he being paid?  Will he benefit financially if the MFA passes? (besides his stated hope for lower property taxes).  Who is funding his travel?   It certainly doesn’t sound like the sheep farm does it.  IF he’s being paid, compensated, given options… whatever.  His posts would seem to fall under FTC guidelines (blogger laws) for disclosing financial ties.

I did think it odd that the CEO of Taxcloud and Sten both posted on the same day, to a 2-year old blog post on the topic.  Nothing automatically nefarious, but my spider senses certainly go crazy.  Perhaps one of them shot another an email.

http://www.comptia.org/news/blog/view/11-10-25/another_take_on_internet_sales_tax.aspx

Taxcloud Capabilities vs Statements – There You Go Again.

Anti-MFA store owners including myself have long been upset with Fedtax (AKA Taxcloud)’s public statements (and I’m sure private statements when talking to legislators and their staff) about how all is solved with Taxcloud.  It’s free, it’s software, it’s online.  Problem solved.

I’ve taken them to task more than other CSPs like Avalara because of the reality distortion field they try to generate.

Well now Fedtax is apparently trying to raise more money.  I guess all the repeated trips to D.C. do add up.   Cheerleading for the MFA while demonstrating incredibly simple examples of how Taxcloud can do the simple task of calculating a sales tax for the cart does take time and money.   I’ve never thought this was a particularly challenging aspect in a vacuum and is only the tip of the iceberg, not anywhere near a solution.  But they don’t care.  Their business model requires the MFA to pass for the business to succeed.

The problem is with their public executive summary regarding their note offering. (9/23/2013)

“At the time of this writing, Taxcloud is pre-integrated with over 40 commerce platforms”

Either their partner page is out of date, or this is wrong.

I saw 42 listed partners on their page (now 44).  17 show as coming soon.  Which equals 25.

Yahoo Stores are one of the partners listed in their Prezi presentation for investors, referring to the partners they support.  But…

Yahoo Stores aren’t yet supported at the time of this writing (the cart I know and use).

“Pre-integrated” would be a stronger phrase than I would use – but I was an IT guy, not a marketing guy.   Seems like marketing fluff at best.  Even if/when they do actually support Yahoo, it would be through a third party developer, not something I’d call pre-integrated.  But the point is moot since it’s not supported.

On the face, it would appear that Taxcloud is making demonstrably false claims again.

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!