Fact Check of Marketplace Fairness Coalition’s 5-22-13 Fact Check

From their “fact” check.

“Instead, Heritage last night attacked four well-known conservative organizations that
support passage of MFA and a level playing field for all businesses.   The crux of
Heritage’s argument stands on the 1992 Quill Supreme Court decision, which they claim
“has worked well.”  Unfortunately, Heritage once again ignores the key fact that in it’s opinion the Court
made clear that only Congress – and not the courts – can establish the rules of interstate
commerce.   Moreover, the Quill decision involved old-fashioned pen- and-paper catalog
sales — not Internet sales — so today’s multi-billion dollar online markets were not
under consideration in Quill.”

Heritage did not ignore that key fact.  They actually addressed it head-on.

“State legislatures been not been denied their right to establish their own sales tax laws. Indeed, they have all made decisions as to whether—and to what extent—sales should be taxed. Rather, they’ve been denied the ability to apply those laws to businesses that have no presence within their borders. That states can have their own laws that apply only to people and businesses that choose to reside within the state’s borders is at the very heart of federalism.”

States have every right to charge their residents use tax.  And they do.  It’s up to the states to enforce existing laws on their own residents.  Those same residents who live there and vote. 

And the Quill decision from 1992 did pre-date Internet commerce, it certainly didn’t pre-date remote commerce which has existed for more than a century before with the Sears catalog.  Any of this sound familiar?

“In 1886, the United States contained only 38 states. Many people lived in rural areas and typically farmed. Richard Sears had been a railroad station agent in Minnesota. He moved to Chicago, Illinois, where he met Alvah C. Roebuck who joined him in the business. In 1893, the corporate name became Sears, Roebuck and Co.
Richard Sears knew that farmers often brought their crops to town where they could be sold and shipped, and then bought supplies, often at very high prices, from local general stores. He and Roebuck offered a solution via mail-order catalogs. Thanks to volume buying, railroads, post offices, and later rural free delivery and parcel post, they offered a welcome alternative to the high-priced rural stores.
By 1894, the Sears catalog had grown to 322 pages, featuring sewing machines, bicycles, sporting goods and a host of other new items. By the following year, dolls, icebox refrigerators, cook-stoves and groceries had been added to the catalog. Sears, Roebuck and Co. soon developed a reputation for both quality products and customer satisfaction. Its wide range of products was very popular, especially in areas far flung from big cities and large department stores. People had learned to trust Sears for other products bought through mail-order, and thus, sight unseen. This laid important groundwork for supplying a house, possibly the largest single investment a typical family would ever make.” – Wikipedia.

Later in the fact check: “eBay and Heritage also repeat their false claims that the legislation would increase
small business costs, including potential audits. ”  Either they’re not familiar with the language of the MFA themselves, or, more likely, they’re hoping you’re not.  The legislation specifically requires states to provide sellers with free software that calculates the sales tax due at the time of filing and files sales tax returns.  And, the bill specifically limits the liability of sellers using the state-provided software.”

Well, we’re actually quite familiar with the MFA. 

Any free software would be standalone and could and would vary from state to state.  Frankly, there’s no way to integrate each state’s unrelated software into an e-commerce system.  The only realistic way is to use paid software.  The time and effort to integrate it as much as possible is significant and Avalara (for example) only supports a small subset of all the carts and order processing systems right now.  And they don’t support Amazon sellers.  There would be initial work, cost, and then ongoing yearly costs every year.

Audit Risk?!  PLENTY.  Nothing in the MFA meaningfully reduces audit risk.  The only language reducing the risk is if the software provided by the state miscalculates the tax due.  That’s the only safe harbor the MFA offers in section 2g “Relieve remote sellers and certified software providers from liability to the State or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the State.”

MFA actually CONFIRMS one of the worst parts of the MFA’s audit risk.  Perhaps the MFC should read it sometime.  Section 2a requires that audits be limited to a single entity PER STATE “a single audit of a remote seller for all State and local taxing jurisdictions within that State”  So now remote sellers face up to 45 audits per year, not 1.  No fairness about that at all.

It’s unfortunate that the Marketplace Fairness Coalition continues to mislead on these issues, but that’s what they’re paid to do.

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