Online sales tax would hurt minorities, women, says media council

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The Marketplace Fairness Act would allow each state to collect an online sales tax when its residents make online purchases from out-of-state retailers. Currently, states can only collect sales taxes on online purchases when their residents purchase from in-state retailers.

Brick-and-mortar stores claim the Marketplace Fairness Act would eliminate the unfair advantage online retailers currently have because online retailers don’t have to collect a sales tax. Small-business advocates say the bill’s $1 million exemption is set too low, and it would place undue compliance burdens on small businesses.

To ensure that minority- and women-owned businesses aren’t disproportionately harmed under an online sales tax bill, “we need to think carefully about coming up with a more accurate definition of small businesses,” Turner-Lee said.

The current small-business exemption in the Marketplace Fairness Act could keep minority- and women-owned businesses from operating across state lines, she said.

Tuesday’s call also served as the release of a paper critical of the Marketplace Fairness Act, pointing to a lack of evidence for the $1 million exemption. 

The paper was authored by Jon Orszag, who served as economic adviser to former President Clinton, and commissioned by eBay, a vocal opponent of online sales tax bills, including the Marketplace Fairness Act.

Orszag called on Congress to use the small-business definitions outlined by the Small Business Administration, which categorizes a business as “small” based on the industry it’s in and the number of employees it has.

According to Turner-Lee, the paper was written before House Judiciary Committee Chairman Bob Goodlatte (R-Va.) released the principles he would require in an online sales tax bill last month. One principle was that compliance should be so simple that a small-business exemption is unnecessary.

The MMTC is “watching that debate closely” but still feels that an accurate, fair definition for small businesses “is going to be critical to where that dialogue goes,” she said.