Raising the small seller exemption from $1 million to $5 million in the Marketplace Fairness Act (MFA) now before Congress would barely affect state treasuries, according to a report released by the Small Business Administration last week.
Were the bill to adopt the $1 million small seller exemption (SSE), it would affect 1,817, or 4.5 percent, of electronic shopping and mail order houses accounting for 57.3 percent on national online retail sales, according to a 47-page report conducted by University of Tennessee Center for Business and Economic Research. A $5 million SSE would affect 750 companies, but still capture 57 percent of online retail sales volume.
A version of the MFA passed 69-27 by the U.S. Senate in May sets the SSE at $1 million.
The findings are based on an examination of a sample of 231 Internet Retailer Top 1,000 companies. Researchers found that determining the impact of sales tax legislation on actual collections is complicated by the fact that many of these firms are already collecting sales taxes for a large number of states in which they currently have nexus.
It found 38, or 16 percent, of the surveyed companies collected sales taxes for all 45 sales-taxing states. Only 8, or 3 percent, of the surveyed companies do not collect any sales tax, and 57, or 25 percent, collect in only one state. The average online retailer in the sample collects sales taxes in about 18 states, which together generate about 47 percent of the total national state and local sales tax collections.
“This objective, non-partisan and peer-reviewed academic analysis and report from the Small Business Administration confirms what local retailers have been saying for decades,” said David French, a SVP with the National Retail Federation, which has lobbied for MFA type legislation for a decade. “The lack of a level playing field between brick-and-mortar stores and their online and remote competitors is blatantly uneven and unfair, and continues to place them at a competitive disadvantage.”
