Guest Blog: What the Marketplace Fairness Act Could Mean for Your Business

The Senate recently passed the Marketplace Fairness Act of 2013[MFA] by a vote of 69 to 27, and the bill now awaits debate in the House. If this bill passes it could dramatically change sales tax requirements for many businesses within 180 days after it becomes law. But, of course, the most important question is what it might mean for your business. It’s important to consider:

1. Can your business handle the change?
2. Does your ERP system handle the change?

This post will unpack the MFA and how it could impact your business’ tax requirements. Additionally, we will give insight into whether you need to do some planning so your current infrastructure can handle the change.

MFA overview:

Today, if your business sells into states where you have no physical presence—like a warehouse, storefront, or sales personnel—you don’t have to collect sales tax in those states. The MFA would change this by allowing states to require out-of-state businesses to collect sales tax, even if they don’t have an in-state physical presence.

In other words, if you’re based in New York and currently sell into California without collecting California sales tax, MFA would give California the right to make you collect sales tax on sales made to its residents.

There are two caveats to the authority MFA would grant to states.

• First, in order to enact MFA, states must meet certain simplification requirements to their tax codes, like providing a centralized sales tax administration for both state and local jurisdictions. Currently 22 states have tax codes that would automatically meet these requirements. Learn more about which states would have the easiest time implementing MFA: http://salestaxchanges.com/#map

• Second, in its current version the bill makes an exception for businesses that gross less than $1 million per calendar year in total U.S. remote sales. Learn more about the small seller exception here.

What it would mean for your business

If the bill passes, you may have to start collecting sales tax in states where you currently don’t collect, provided that you don’t qualify for the small seller exception. For some businesses this will mean a significant increase in the amount of states where they have to collect, file, and remit sales tax.

In addition, the bill would not change any of your current sales tax requirements. If you collect and file Illinois sales tax, you will continue to do that, with our without MFA.

What you can do to get ready:

Most ERP systems have inherent or limited ability to manage complex tax situations. In this case, the real overhead is not only setting up but also the ongoing maintenance of tax tables. So either way, check to see if your ERP system integrates with AvaTax. If it does not, start looking at a system like SYSPRO.

AvaTax, the cloud-based tax management solution, is a fully-integrated add-on. With modest set-up required, AvaTax populates the taxability tables and sales tax fields in the order-entry screens. SYSPRO users and their customers both benefit. Users don’t have to learn any new systems and customers get current and accurate sales tax calculations.

While sales tax calculation and remittance may seem to be more complex with this pending legislation, SYSPRO clients have relief and can rest easy knowing their company can easily handle the MFA changes.

Learn more about being ready for sales tax changes during a webinar on June 13.
Register here.

-Will Frei, Sales Tax Specialist- Avalara

WillSince 2011, Will Frei has covered sales tax news for Avalara, writing articles and blogs on best practices, legislation, and sales tax technology.

 

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