Marketplace Fairness Act attacks small business
When I started TradePort USA in 2002, my business partner and I had just $12,000 to put toward startup costs. Since then, we have been able to expand significantly, hire 16 local residents and open a warehouse in Somersworth.
Without the opportunities afforded to us by the Internet, we would not have been able to grow our business by reaching customers across the globe, who desired our services.
However, small businesses like ours are at extreme risk due to the Internet sales tax bill currently being considered by Congress.
Similar to any other New Hampshire business, whether a large retail establishment, liquor store or bakery, we are not responsible for or required to collect taxes from any of our customers regardless of where they live. We have no sales tax, and we do not depend on sales tax revenue for our state budget.
Yet proposed federal legislation — ironically known as the Marketplace “Fairness” Act — would require me to serve as a tax collector for over 9,600 tax jurisdictions and 45 states with different tax rates and rules across the country.
Unlike large-scale retailers that have stores and warehouses across the country, small Internet retailers are usually only located in one state. We should only be required to adhere to the laws in states where we run our business operations.
It’s unfair to force us to collect for tax jurisdictions and face audits from tax authorities where we do not have a physical presence. The audits pose a major threat for small business owners. There is no protection in the proposed legislation to prevent multiple far away tax jurisdictions from subjecting my business to a costly auditing process.
Small businesses like ours simply do not have the resources to abide by this law and remain profitable. Running our business, responding to customer inquiries, integrating the necessary software for the law, responding to audits and remitting sales taxes to thousands of jurisdictions would be nearly impossible without a staff of in-house accountants.
It would be a very complex process. Software can’t respond to a tax audit or automatically enter information into a collection database — it would involve significant manpower and time.
Proponents of the MFA argue that it protects small businesses because it would exempt those with less than $1 million in annual out-of-state sales. In order to promote the growth of small businesses, the MFA must include a greater exemption. My business generates more than $1 million in sales per year, but lawmakers should not confuse sales with profits.
A business like mine is far from what should be considered a large retailer. The small profit margin I earn is used to purchase inventory, pay salaries and pay living expenses. Complying with this law would severely impact my profit margins and stifle my capacity to expand our business, hire additional employees and compete with large national retailers.
Sens. Kelly Ayotte and Jeanne Shaheen have both rejected the notion of a federal Internet sales tax law. I am very proud of the leadership demonstrated by our New Hampshire delegation, and I hope that they continue to fight for small online businesses.
Congress should follow their lead and oppose any legislation that would hamper growth among small businesses operating online.
New Hampshire’s small businesses — whether they are on “Main Street” or online — have always served as an engine for economic growth and we should not be subjected to public policies that would harm us.
David Lahme is president of TradePort USA, Somersworth.