eBay Seller Discusses Marketplace Fairness Act Challenges

October 29, 2013

Enjoyed our interview with Cori from UPak on the software challenges of the Marketplace Fairness Act? This week, we wanted to bring you even more perspective from another one of our community’s small business owners. In this candid interview, Tony, owner of Fredrickson’s, discusses his fears regarding the Marketplace Fairness Act.

Obviously the Marketplace Fairness Act brings up a lot of questions about tax calculation, collection and remittance. So how much time would you say you currently spend on all of that, without the Marketplace Fairness Act in place?

The people that I have in my business that handle the collection and calculation of taxes certainly spend a good number of hours in any given week because there are quite a few different jurisdictions and percentages within our state.  All of these different jurisdictions taken into account it is already a big task.

The study showed that the ‘free’ software is not a viable option for a lot of businesses and the software would cost small businesses of your size between $80-$290,000 in setup and integration costs and then an additional $57,500-$260,000 in costs for maintenance, updates, audit, and service fees on an annual basis.  What is your reaction when you hear that you could be faced with these tremendous cost projections?

Well, normally from what I have seen in business, when there are cost projections they are normally on the low end of what they actually turn out to be.  But, even if the costs are on the lower end of these projections it would be a deal breaker for us.  We would not be able to continue to do business as we are doing.  It would be really bad for our whole entire business.  

The study brings up some valid points about product classification and tax exempt customers and the difficulties of handling that. Do you have any experience with this currently that you foresee being an even bigger issue with the Marketplace Fairness Act?

Absolutely.  There are already different types of exemptions that we have to make sure that we have the proper paperwork.  Or, if we don’t have it properly collected in the paperwork we are liable for the taxes.  So, it is very important that a lot of time is spent collecting the proper tax exempt forms for what we have right now.  If we had to expand that into the different forms needed across the United States and all of the different jurisdictions it would be a nightmare.  

Being a multi-channel business do you have currently have your own software that streamlines different processes in your businesses that relate to order management, inventory, customer service, returns and refunds? And would it be difficult and time consuming to integrate new software into what you already have established?

We have our own software systems and absolutely it would be extremely expensive to get any type of software change.  To have to pay for our own software as it is and then integrate any new software in would be a lot higher cost than “free”.  

Given that using 46 different types of software is probably not feasible for a business of your size, you’d probably have to go out there and purchase a more sophisticated piece of software. How much time and money would it take to integrate that software into your website?

We have had the same software system for years and I remember that when we bought it new, it took over a year before we felt comfortable with it and felt that we had it fully integrated into our business.  I can’t imagine trying to incorporate all of the other states’ requirements into our system now.  I can imagine it would take an extremely long time and a good amount of money.  The entire prospect is scary.  

A study talks a lot about ‘checkout friction’, or the notion that any errors preventing a buyer from quickly and efficiently buying a product are likely to result in a customer giving up and abandoning their purchase. The Marketplace Fairness Act would require that shoppers type in their full shipping address to be matched against a database so that you can charge sales tax based on the appropriate sales tax jurisdictions, that could create friction. What’s your reaction to this?

A majority of customers don’t feel comfortable giving out hardly any personal information whether it is in order to get a price, or find out what we offer, and to see if they can trust us as a company to do business with.  For us to have to ask for information like this would run a customer off really quickly.  

The MFA does not require states to consolidate audits or respect other states’ audits. Have you ever been through an audit? How do you feel about this?

We have had an Alabama state tax audit approximately 3 months ago, so we are familiar with the process.  It took approximately 2 weeks and included lots of time with our accountant going over paperwork and going over records.  It took up a lot of our time; time we should be spending on running our business and taking care of our customers.  That was just for one state.  To have to sit through that from other states doesn’t make any sense to me.  

There was a different study released recently that covered the $1 million small business exemption currently attached to the Marketplace Fairness Act.  A renowned economist, Jon Orszag, released the study showing no empirical evidence exists proving that this $1 million number is an accurate number to protect small business.  As a small business owner would you agree with the findings of this study?

I would absolutely agree that the exemption is too low.  We are definitely a small business and when you consider total volume the $1 million is too low to be considered proper protection.  We have a small number of employees and we operate out of one location and are a true family business.