Sales TaxIt is illegal for States to deem a marketplace as the merchant of record. They have absolutely nothing to do with the transaction outside of the fact that it took place on their site. A piece of intellectual property is what they own, not the physical products they're making money from via the fees they assess on the transaction. Just like a credit card company does with its services, but they're not considered the merchant of record. The business that actually sold the item to their credit card customer is.
By making marketplaces the merchant of record, you are allowing these crooks to take control over their sellers’ finances AND their businesses. Not only that, but you are allowing them to get away with tax evasion, as well as fee evasion. They are evading federal taxes by including the sales tax money they deducted from the transaction as part of the sellers’ gross sales receipts, while also deducting the sales tax expense on their own tax forms. Thereby, they are over-inflating the TRUE merchant’s gross receipts while doubly deflating their own.
All while the TRUE merchant cannot account for those extra funds via any government document. Why? Because the States have illegally shifted ownership of a business and its inventory to a website tool sellers use to conduct their business. Since they have nothing to do with the sales tax being assessed on their own businesses, they have NO government documentation to account for those extra funds in their gross sales and CANNOT just enter them as sales tax paid like they would normally do IF they were required to collect themselves.
Sellers are also being assessed the payment processing (ie, PayPal or credit card) and marketplace transaction fees on these amounts they never even see. In many cases, if not most, the sales tax shouldn’t have even been charged because that business doesn't make enough in sales to meet the state's threshold.
So, not only are they paying fees on money they never see, but it’s also often money that should never have been collected. It is also money that is being considered by marketplaces as part of the true merchant's gross sales without any official way (state sales tax document) for that merchant to account for what was deducted. In essence, either the marketplaces or the states are collecting sales tax from businesses that are not legally required to do so.
Are marketplaces pocketing that fee-free money or are they being required to report and remit it? If not, then that’s blatant fraud on the marketplace’s part and the States are accessories to the crime. If the States are receiving those funds, then that’s blatant fraud on the States' parts and the marketplaces are accessories to the crime. Either way you look at it, it's a crime the States and marketplaces are committing, whether or not intentionally.
The States Have It All Backwards
Quite frankly, States are misinterpreting the ruling of Wayfair vs. XXX. The whole purpose of the [interstate trade laws] was to protect each state's citizens and resident businesses from having tax laws imposed on them by other states. By eliminating that protection, states should have simply started charging sales tax on all transactions conducted within their state by resident businesses that meet their threshold.
Whether they are doing that business online or offline, physically or electronically, is completely irrelevant. The way legislators should be looking at online businesses, whether or not they are conducting business on a marketplace site, should be no different than the way they look at a business within a mall. We are NOT third-party sellers. We are THE sellers using a website tool to make the sale.
States cannot legally require the owner of a mall (the "landlord") to be responsible for the sales tax liabilities of each of their tenants (mostly small businesses). Nor would a tenant be required to collect sales tax for another state if they're only making a few sales there, according to each states' separate tax laws.
Furthermore, the landlord is not the one conducting the sales transactions. They simply provide the means by which sales are conducted by others, mainly small businesses and not just those within the US since it's being conducted electronically. Basically, what a landlord provides are four walls; whether concrete, steel, wood, or virtual.
I live in Texas, so will use my state as an example. Let's say a customer walks into a shop in Texas and buys something. Whether they're from Texas, Pennsylvania or Kalamazoo, they're going to pay a sales tax...to that Texas business. The way states are going about it now, if that customers "walks" or browses their way into a Texas shop online, the shop will be required to collect sales tax for Pennsylvania when they've never even been there.
The way I see it, I live in Texas and, therefore, it is only natural that Texas law is what I live by; not some state thousands of miles away. Now, if I'm actually visiting Pennsylvania, then, yes, I am subject to their laws and I pay their sales tax when I shop there locally. It should be that even if I shop their electronically with my tush sitting at my laptop in Texas, I would still be subject to paying Pennsylvania's sales tax since it's their resident business I'm buying from.
Furthermore, it is unlawful for states to impose such a serious burden on any business of any size. Why and how on God's green Earth would anyone expect a business to keep up with potentially 50 different sets of sales tax laws? Wouldn't it have been much easier (and fairer) on everybody if states simply required their own resident businesses, physical and eCommerce, to collect sales tax from all of their customers if they meet their own state's threshold?
One set of sales tax laws for each business to comply with and all participating states are collecting sales tax they weren't previously collecting -- from their own resident businesses just like they always have. It really is that simple.
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