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Equipment Supplier Says Marketplace Fairness Act Is Likely to be Expensive

Closing tax loophole will make profit margins slimmer

As the Marketplaces Fairness Act moves forward in the Senate, Radio World caught up with Michael Sharpstene, business development manager for equipment retailer SCMS, to get his perspective on how the bill will affect broadcast equipment suppliers and sellers.

Sharpstene anticipates that it will be difficult and pricey for authorities to enforce the bill, in part because ensuring compliance will require a financial investment, in the form of the mandated tax software. 

“No matter what happens, it’s just going to be very expensive for them to enforce something like this. They’re going to expect companies to pay and be financially burdened by having to set up these tax rates,” he said.

Although the bill requires states to both simplify the tax code and provide free software to calculate rates, “for websites, it’s not as easy as just adding in at the end of each transaction. Everything is automated,” Sharpstene said. He added that companies may also need additional manpower to process and submit taxes, another financial burden for which business must compensate.

“People go online to find the best deal. That’s the beauty of the Internet,” Sharpstene said, emphasizing that profit margins for online sales are often slimmer than those of stores with physical presences.

Sharpstene said that adding an Internet sales tax may level the playing field between physical stores and online retailers, but that also means customers will likely notice a difference in pricing.

“There’s no other way around it because, to go through that process, the money has to come from somewhere. They’re not going to sell anything for free.”

It is also interesting to note that the bill will not affect purchases via telephone, as part of the Mobile Telecommunications 14 Sourcing Act, which limits what transactions are taxable based upon “place of primary use.” 

Other broadcast equipment sellers have played their cards close to the vest this week, declining comment on the possible impact of the legislation. However, Radio World spoke with broadcast equipment sellers about the bill in September; at that time, reps expressed concerns about the Marketplace Fairness Act’s impact on business.