August 7, 2013
Special to Business in Savannah
When is a proposed sales tax more than just a sales tax? When it has the potential to have a negative impact on the vital U.S. logistics industry.
The Marketplace Fairness Act of 2013, a bill which could give U.S. states the ability to collect sales tax from online purchases, has the potential to lead to a revenue windfall for state governments and a significant shift in the way goods are bought and sold online. However, if the act becomes law, the state tax increase could effectively discourage shoppers from buying products online and inadvertently encourage major online retailers like Amazon to handle logistics internally—rather than working with shipping companies like UPS and FedEx—as a cost-saving measure.
Supporters of the Act, like the Retail Industry Leaders Association, argue the bill would level the playing field between retailers operating exclusively online and brick-and-mortar businesses by giving states the option to levy a sales tax. Opponents maintain the bill undermines state sovereignty by giving states the ability to impose taxes beyond their own geographic borders and threatens consumer privacy by forcing retailers to provide customer data to state governments.
The Marketplace Fairness Act has already passed in the Senate and is currently making its way to the House of Representatives for a final vote. If passed, this legislation could negatively impact small parcel logistics providers as well as the consumer, who will ultimately pay higher prices for online purchases. In addition, online retailers will face higher costs for sales tax record-keeping, compliance and collections, which will also result in higher costs being passed on to the consumer.
Since the 1992 United States Supreme Court decision in the landmark case Quill Corp. v. North Dakota, states have been prohibited from enforcing sales and use tax laws on sales by out-of-state catalog and online retailers. This law has been upheld for more than two decades, but may now be superseded by the Marketplace Fairness Act.
Some professionals estimate 2012 online commerce exceeded $23 billion, so the potential sales tax revenue for states is considerable by any measure. At a time when states are facing budget shortages and cutbacks, this online sales tax revenue seems especially appealing to state governments
However, the Marketplace Fairness Act threatens to negatively impact the U.S. logistics industry, which ships online purchases to customers across the country. Locally, if major online retailers transition their shipping in-house and experience reduced sales due to the additional tax, the impact on the nation’s logistics industry will be felt right here in Savannah, which serves as a vital transportation hub for the entire Southeast.
Local retailers engaged in online commerce would be wise to keep an eye on the Marketplace Fairness Act as it moves through the legislative process. For additional information about how the Marketplace Fairness Act may affect your business, please contact an attorney who specializes in transportation and logistics law.
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