Although the potential impact of federal legislation requiring remote sales tax collection (the Marketplace Fairness Act or MFA) has been focused mainly on large internet retailers, this legislation could have a substantial impact on any middle market business making sales in multiple states or pursuing an e-commerce strategy.
While viewed and promoted as an ‘internet seller’ bill, MFA would affect any business that makes sales over $1 million annually into states in which it does not file sales tax returns (e.g., states without ‘nexus’). MFA would allow a state to collect sales tax from any ‘remote seller’ making a ‘remote sale’ into the state, which would result in significant additional compliance responsibilities for businesses.
With the Senate passage of MFA in May on a bipartisan basis, the bill has taken a major step toward becoming law. As a result, it is essential for middle market companies to begin analyzing the ramifications of this legislation and preparing to develop and implement a compliance process accordingly.