Revolving Door from State Government?

I guess it’s not a total surprise when people switch from the private sector to the public side… but boy it seems to be a revolving door.  Reading the who’s who in the Streamlined Sales Tax papers, I occasionally forget if I read about them as a state employee, or as a private employee working with the states.  Nothing automatically wrong about it, but it seems to be a pretty cozy group.  A few examples I’m aware of:

Scott Peterson

Was:  Executive Director of the Streamline Sales Tax Governing Board  & was director of the Business Tax division for the South Dakota Department of Revenue and Regulation.

Now: Director of Government Affairs, Avalara.

Joan Wagnon

Was: President of the Streamlined Sales Tax Governing Board (See what I mean?), Secretary of Revenue for the State of Kansas.

Now: Executive Vice President, Fedtax

Russ Brubaker

Was: President of the Streamlined Sales Tax Governing Board (A Trifecta!)

Now: Vice President, Government Affairs, Fedtax

Gary Centilivre

Was: Chair of the Streamlined Sales Tax Certification Committee from 2006 to 2013.  “The Certification Committee advises the Governing Board on matters pertaining to the evaluation, testing, certification and recertification of service providers and automated systems” – like Fedtax?  Also a state tax official at the Kansas Department of Revenue.

Now: Vice President, Midwest Operations and Outreach, Fedtax

Charles Collins

Was: Streamlined Sales Tax Project Co-Chair

Now: VP of Government Affairs, Taxware

If the Marketplace Fairness Act passes, I wouldn’t be surprised to see more jump ship for the new gold rush.

 

States pay CSPs – We get nothing

If the Marketplace Fairness Act passes, remote retailers will have a variety of integration issues (if support for their platform even exists) and costs.  Personnel costs in time and salary, CSP fees (for most) and even paying for the credit card fees on the newly collected sales tax.   As covered in a previous blog post, remote retailers will pay around $2,000 per year, per million in sales.  So we become unpaid state tax collectors, with all of the compliance burdens and no reimbursements for our costs.  Big-box retailers (like those sponsoring the MFA) can usually get some reimbursements from the states.  But we’re not Wal-mart.

Who does get paid by the SSUTA states?  The Certified Solution Providers (CSPs).  And a lot.

The CSP compensation schedule is per merchant, not total.  So most retailers will be in the top-2 tiers of reimbursement.

  • 8% – up to about $3.5 million in sales on average
  • 7% for the amounts above $3.5 million to $14.5 million.

Sample figures for a hypothetical retailer with 7% sales tax average.

$1 million in sales – $70,000 in collected tax.   CSP gets $5600 per year.    Retailer stuck with $2000 in CC fees alone.

$3 million in sales – $210,000 in collected tax.  CSP gets $16,800 per year.  Retailer stuck with $6000 in CC fees alone.

$5 million in sales – $350,000 in collected tax.  CSP gets $27,000 per year.  Retailer stuck with $10,000 in CC fees alone.

Thanks for nothing.

The Streamlined states group have batted around reimbursing retailers for costs incurred but have done nothing.   There’s room in the SSUTA values to compensate retailers, but we’re not at their meetings and don’t have the cozy relationship CSPs do.

Not all supported? Are any?

From an article in Ecommerce Bytes titled “Merchants Would Face Hefty Costs with Online Sales Tax Bill”.

Yet another cheerleading quote that is certainly misleading at best.

“We admit that not all order management systems have pre-integrated with TaxCloud (yet), but that tide is shifting rapidly”

What order processors do they support?  None that I am familiar with, at least according to their partner page.  None of the order processors that I’m aware of are on their list.  And that’s where most of the nitty-gritty work of charging, refunding, partial shipping and more occurs and that’s where support is key.  The shopping cart is only the tip of the iceberg, but not the most important part for many.  I’m not sure what Tax Cloud’s CEO is referring to as an order management system, but it’s meant to imply quite a bit of existing support.  Where?

“”Our view is that sales tax compliance is approaching a “tipping-point” where it will become a standard feature – soon all order management systems will have sales tax management already on-board just to remain competitive.””

My view is that they want MFA to pass, so all the software companies will be forced to scramble to integrate with Taxcloud and/or others at the barrel of a gun and with a deadline.

October 14th 2013: 44 partners listed.  Almost 1/2 are listed as “coming soon”.  Not sure which of them I would call an order processor.  Maybe Salesforce?

 

 

Coordinated Pro-MFA Blocking – Our Twitter Acct Blocked from Following Pro-MFA Sites

Well, I guess the Pro-MFA forces got together in a dark room, perhaps near Bentonville Arkansas with all the money and time Wal-mart has pumped into foisting the Marketplace Fairness Act on consumers and smaller remote and catalog retailers.

I picture Fedtax/Taxcloud, Finn Partners, DDG Advocacy, Wal-Mart Womack and others sitting around smoking cigars, sipping cognac and twirling their old-timey mustaches.   Besides these lobbyists, PR firms and general purveyors of misinformation about the Marketplace Fairness Act are the pro-MFA shills.  I’m sure Sten is there, coordinating with them what he needs to copy and paste next, or what new commenting account he should start up.

OK, time to stop daydreaming, back to earth.  Pretty pathetic that all of these pro-MFA forces clearly acting in concert blocked our twitter account from following their accounts.  It’s not like we can’t still reply to their never-ending stream of BS about the Marketplace Fairness Act in their twitter accounts.  Those PR firms must be pumping those interns full of coffee to keep it up.

P.S. For those slow on the uptake or humorless on the subject (DC) – The above scene was obviously a joke.

You’re going to feel a little “pressure” – Audit Pain Mistatements (Taxcloud)

Ever heard that little white lie at the dentist or doctor’s office?  That’s their euphemism for extreme pain.  When a doctor uses that phrase, you know it’s going to hurt soon.

I now have a new equivalent:  “post-modernization audit.”

Fedtax/Taxcloud is at it again, spouting absolute nonsense regarding the risks and pains of an audit in discussion comments.  Kevin Hickey had written a piece about classification issues they had in an audit in their home state of Pennsylvania.  It was brutal, time consuming and ended up leading to a $25,000 fine due to confusing interpretations and classification issues.

TaxCloud chimed in:  “Ultimately, the situation described is a business affected by historic laws, not laws envisioned and enabled by the proposed federal legislation. Indeed, resolution of the writer’s concerns are the exact purpose of the bill.”

Which of course, is nonsense, and diregards completely the reality of his story and our legitimate concerns if the Marketplace Fairness Act passes.

The MFA is the CAUSE of the increased audit risk for a smaller business and are absolutely not the exact purpose of the bill.  How does letting 45 more states audit you make things better? A 4500% increase in audits and more importantly, the liability of audits is the worst part of the Marketplace Fairness Act. To say the purpose of the bill is to resolve this is Orwellian double-speak, just like the name of the bill.

Then, the funnier/worse part.  “thus in no way possible an accurate description of a post-modernization audit.”

Ahh.. See somehow audits will get better in the future if The Marketplace Fairness Act passes.  And we’ll be flying jet packs in the future too.

Auditors behavior will not change.  Items will still need to be poured over, invoices, tax returns, the whole shebang.    Except that you can be audited by 45 more states instead of 1.  A fatal flaw in the MFA and one that is not fixable.

And with all due respect to TaxCloud, how would they know?

  • Taxcloud has only been around for a few years
  • Taxcloud has a fairly small number of clients
  • Their experience is hardly a large enough sample size to really understand audit risks if MFA passes
  • Followup beyond any initial data a CSP could provide wouldn’t be in their understanding

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

I’ve taken Taxcloud to task for downplaying any actual issues in their rosy propaganda pieces to states, Congress, or anyone who they need to convince that a LOT more people should be collecting sales tax.  Frankly, misleading would be charitable in my opinion.

The worst instance was in 2010 when they only supported 6 shopping carts while proclaiming everything was solved with software and the small business exemption of the Marketplace Fairness Act should be dropped to $100,000, or even none at all.  Covered in this post titled Taxcloud 2010 statements vs. capabilities.

But this statement in a letter to the Governor of Maine contains a demonstrably false claim. (Italics and underlining mine)

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.”

And this is completely false.  He’s commented on this blog about the fact that Taxcloud doesn’t support a number of popular shopping carts.  As of this writing, Taxcloud doesn’t support our cart.  They don’t support our order management system (which is even more important than the cart).  They don’t support Amazon orders.  Any retailer apparently doesn’t include me.  Or many others.   According to builtwith.com, the top-ten shopping carts for the top 100k or top million sites are:

  • Magento
  • Yahoo Store
  • Volusion
  • Miva Merchant – Plug in available now, but didn’t appear to be at time of letter
  • osCommerce – Supported
  • BigCommerce
  • VirtueMart
  • WooCommerce
  • Magento Enterprise
  • ATG Commerce

So at the time of this letter, ONE of these top 10 shopping carts were supported.

What’s so galling about the pronouncements and the quote of this blog entry from a a pro-MFA powerpoint presentation for elected officials  covered in another post is that it’s a pattern.  Until the Senate passed the MFA, I was fairly unaware and certainly not involved.  I’ve been immersed in the MFA ever since,  so I only now go back and see the misleading and in this case a false claim to help sell the MFA.

Saying it certainly does not make it true.

Fed-Tax & Others “The world is not flat” – Self-serving propaganda for the MFA: UPDATE

UPDATE:  I should have known.  According to the Metadata for the powerpoint presentation version, the author is dcampbell at fedtax.net.  No wonder he threw out the “even free” pitch repeatedly throughout the presentation.  And no wonder he had the gall to create this presentation.

Yes, we’re flat-Earthers now for pointing out very specifically and factually how the Marketplace Fairness Act will harm our businesses.

Fed-tax the world  is not flat presentation(PDF)

A self-serving, preaching to the choir presentation to the Streamlined Sales Tax Governing Board.   Reinforcing how easy everything will be with their assistance.  And this fine PR puff piece is to be trotted out to “educate” the media, representatives, lobbyists…

“This presentation was developed by the Certified Service Provider community for use by the SSUTA Governing Board in educating legislators, lobbyists, analysts, and the media about simplifications made possible by the SSUTA, in conjunction with the technology implementations of the various Certified Service Providers.”

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

A Powerpoint presentation from the 6 firms who will reap a huge financial windfall if the MFA passes doesn’t make it true either.  In fact, it’s not true.

It trots out the usual myths of it’s free/cheap, it’s easy, no audit risk, virtually all systems supported… I’ve covered those myths enough I’m not going to again in this post.

 

TaxCloud – 2010 Statements vs. Capabilities

R. David L. Campbell, a founder of TaxCloud was kind enough to comment on my blog post regarding their attempts to lower the small business exemption to $100,000 or actually even completely remove the exemption.  Why?  Because it’s so easy, everything will be solved by software so no one really should be exempt.  First, a recap of his reply:

“I wanted to take a moment to respond to your justified frustration that several of the largest hosted commerce platforms do not support TaxCloud yet. Let me simply say that we share your frustration. We have spoken to all of them, and many of them believe that most of their sellers will be exempt (below the $1M small seller exception in the MFA). Accordingly, they are reluctant to devote resources to enable TaxCloud. As you know, in a hosted commerce environment (versus installed software), only the host can make modifications to the platform – so, we must standby for their cooperation.”

But that’s not the story he gives at every opportunity.  And also perhaps yet another reason why he’d like no small business seller exemption.

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.
  • 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!

In September 2010, R. David L. Campbell offered a prepared statement for the record for the public hearing regarding the small business exemption of the Marketplace Fairness Act (H.R. 5660).  Please keep in mind that this is only 2 months after being certified as a provided.

“Although I make my remarks today in support of setting the SBE threshold at $100,000, this is only because we have not been offered the opportunity to argue away the SBE altogether.”

Of course his new business which stands to reap financial rewards if MFA passes, wants every single company to be affected by it.  No one with remote sales should be exempted.  He then goes on to explain why.

“Sales Tax Collection Services Make Compliance Easy”

“TaxCloud handles every aspect of sales tax collection and remittance for our clients. Most merchants
are able to set up TaxCloud in less than 20 minutes. TaxCloud can be integrated into virtually any
accounting or e-commerce shopping cart system, and it is completely free to merchants.”

Let’s parse this. Handles every aspect?  Perhaps for your clients who have supported carts and extremely simple setups.  Otherwise, clearly every aspect doesn’t cover a huge chunk of retailers’ true needs.  They can’t even handle our shopping cart at this time, let alone our order processing software or Amazon sales.

“can be” integrated into virtually any e-commerce shopping cart system.  This just isn’t the case in my opinion.  If by “can be”, they mean their is an API and with custom IT and programming work, you might be able to get almost anything to work, perhaps, perhaps not.

Let’s take a trip on the wayback machine and look at their partner page for supported carts.  The closest snapshot I have is from November 2011, more than a year after these statements.  Whose carts do they publicly support in late 2011?  (Source: Archive.org)

  • Zen Cart
  • OsCommerce
  • KonaKart
  • X-Cart
  • Presto Cart
  • Paypal Express

Wow!  That’s a really small number of carts to make these statements a year earlier.

Unsupported platforms, but planned or in progress in late 2011 (from their 2011 partner page)?

  • Miva Merchant
  • Google Checkout
  • Avactis
  • 24SevenCart
  • PDShop
  • Magento
  • CS-Cart
  • Prestashop
  • Cartweaver
  • Quickbooks
  • Microsoft Dynamics NAV
  • GoDaddy

That’s still missing a ton of carts and platforms.  Here’s some others they didn’t appear to support in their partners page from 2011, even a year after pitching their solution.  Some of them are still not supported.

  • Yahoo Store
  • Volusion
  • BigCommerce
  • 3dcart
  • Aspdotnetstorefront
  • Salesforce
  • X-cart
  • Zen-cart
  • Shopify
  • Amazon
  • Ebay

He continues:

“The very existence of TaxCloud refutes the primary argument of those who say that in this legislation, “small business” should be defined as a merchant that has more than $100,000 in annual sales. They say that collecting sales tax on out-of-state purchases would be burdensome for small businesses, that it is too costly and time-consuming.

It is difficult to see the merits of this argument when a free service is available that handles every
aspect of sales tax management at absolutely no cost to merchants.”

Except that it’s just not the case.   And that’s my problem with him and his company.  It’s a misrepresentation by a company that will handsomely profit if legislation passes, which is why there is zero credibility here.  Only a tiny handful of carts are supported at the time of this writing (2010).  Meanwhile, in my opinion, he’s vastly overstating capabilities to Congress in this letter to try and help MFA pass and cash in on the legislation.

“There are more than 500 shopping cart solutions on the market today. The three most widely used shopping carts are the complete ecommerce platforms operated by eBay, Amazon, and Yahoo!Stores, which together service millions of sellers.”

And 3 years later, still not supported.  And they supported 6 shopping carts at that time.  Some of which I had not heard of.

Well, maybe it’ll be like Field of Dreams.  Pass it (MFA) and they will come.

“Historically, when faced with security industry or payment card industry mandates, speed of implementation and time to deployment have rewarded these vendors with more customers, so, they tend to be proactive and even aggressive in implementing necessary changes.”

Yes, please pass intrusive, costly and burdensome legislation on many thousands of businesses and hopefully the platforms will have to scramble and support us (Taxcloud).

Finally, his conclusion.

“Conclusion

While I have offered several compelling arguments for setting the SBE threshold at $100,000—
arguments supported by fiscal and political considerations as well as sheer common sense—I would
like to ask the committee to consider whether an SBE is even appropriate in H.R. 5660. I would
argue that it is not, because the very businesses that would be affected by the SBE already rely upon
e-commerce platforms that will easily enable them to collect interstate sales tax — and may, in fact,
not allow them to avoid collecting such tax, once this law passes.”

They are being “economical with the truth” in their arguments.  Cart support is only the tip of the iceberg in the business processes regarding sales tax collection and years later there are still major gaps in their cart support.  I don’t see any order processing software in their partners page, like perhaps Stoneedge, Mail Order Manager, Order Motion.  Quickbooks?  And they don’t handle multi-channel sellers, which I believe would be a large percentage of $1 million+ sellers.  This is just rent-seeking by a company who wants the Marketplace Fairness Act passed so they can collect their toll.  And disingenuous to boot.