It seems so simple!
Actually, it’s very very complicated.
In 2018, the U.S Supreme Court made a landmark rule reversing 50 years of precedence that said retail sales tax should be based on the seller’s address. This was a result of the state of South Dakota suing Wayfair, a Massachusetts-based retailer. The Supreme Court rule enslaves sellers in one state to become tax collectors for all the other 44 state and local jurisdictions that collect sales tax. But first, the state must opt-in and set the rules for out-of-state sellers. Missouri legislators are debating this issue right now with SB 153.
The Wayfair decision forces every seller in the U.S. who ships merchandise across state lines to become a tax collector for every government entity that collect sales or use taxes including states, counties, cities, villages, fire districts, police departments, sheriff departments, ambulance districts, school districts, library districts, entertainment districts, road districts, TIFF districts, economic development districts, convention and tourism districts, conservation departments, parks departments, recreation districts, recycling districts, museum districts, sports arenas, community improvement districts, port improvement districts, transportation development districts, fairgrounds districts, regional jail districts, zoo districts, and more.
The 2020 election will be debated for many years, but one thing we know is that Big Tech created havoc in our elections and reduced confidence in the process. Now the Wayfair decision will put mail order sellers at the mercy of Big Tech.
Thousands of pages of new rules from state, local, and the federal government. A unique sales tax rate for every buyer address. Data maintained by a network of 44 state department of revenue offices connected via the internet to a central computer accessed by private software companies that are a bridge to the hundreds of store software programs plugged into nearly 2 million online retail stores. All that data is updated daily as the rules, laws, and tax rates change. All of this is under the oversight of a new federal office.
What could go wrong? Everything.
Who pays the fines and penalties when it goes wrong? The mom-and-pop business owners who are burdened with an unimaginably large task of compliance.
The proponents of the bill say it is to make a “fair playing field” It does not.
In Missouri, there are 3,000 different sales tax rates based on the nine-digit zip code. One northwest Missouri zip code has 20 different rates within the zip code. Right now, smaller mail order companies have an exemption from compliance in 43 states that ranges from $100,000 to $500,000 per year. Kansas has zero exemptions.
The largest online retailers are now collecting sales (use) tax just like the brick-and-mortar stores. An estimated 70 percent of potential revenue is already being captured in Missouri.
Out-of-state sellers will collect on the buyer’s residential nine-digit zip code while brick-and-mortar stores will collect based on the store’s physical address, and that rate is nearly always higher. For example, in my county of Dekalb, the rate at my house is 6.2 percent but if I drive to the big box store where there is a TIF on top of sale tax, the rate is 10 percent.
Wayfair makes the marketplace less fair and reduces competition.
Every business that ships merchandise or data across state lines must comply with the rules described above. Not just internet sellers — all sellers, including brick-and-mortar stores; companies only selling over the phone; and Amish, Mennonite, and others off the grid and without internet.
Opting in to Wayfair will have unintended consequences. The unfair cost of compliance both in dollars and labor for small businesses will certainly put some businesses out of business while providing legislative cover for the big players such as Amazon and Walmart.
Legislators will be making criminals out of honest business owners who are unable to keep up with accurately collecting sales tax across thousands of different rates and filing the appropriate paperwork on time.
The federal government has no constitutional authority to issue mandates for individual state sales tax laws. The Supreme Court has no constitutional authority to enslave a business owner in one state to be a tax collector for another state and its local governments.
This is not the proper role of the federal government.
Missouri legislators should be challenging this law rather than trying to opt in to the Wayfair sales and use tax law.
Paul Hamby owns an agriculture-based mail order business in rural northwest Missouri. His company ships to customers in all 50 states and 30 countries. He is a director with Mofirst.org