TaxJar Raises $600K as Congress Resumes Debate on Internet Sales Tax
When TaxJar CEO Mark Faggiano introduced himself to Bay Area angel investor and 500 Startups co-founder Dave McClure in San Diego recently, he explained that TaxJar is a local Web startup that helps online merchants track how much sales tax to pay, and where to pay it.
“Your life is about to get very interesting,” McClure replied, and Faggiano nodded in agreement.
Congress has been moving slowly but inexorably to enact Internet sales tax legislation that could make online retailing a lot more complicated. Proponents of the proposed Marketplace Fairness Act argue that online sellers currently hold an unfair advantage over traditional brick-and-mortar retailers because online sellers don’t necessarily charge their customers a local sales tax.
Whether Congress will pass the proposed legislation is anybody’s guess, Faggiano says. Nevertheless, the full U.S. House Judiciary Committee is convening in Washington D.C. this morning to hear both supporters and opponents at a hearing on “Exploring Alternative Solutions on the Internet Sales Tax Issue.”
“The general consensus is that something is coming,” Faggiano says. “We’ve come out against this legislation even though it would help our business, because it does not make things any easier.”
The situation already is pretty complicated. How much sales tax an Internet merchant must collect and forward to state and local tax jurisdictions depends on a number of variables, including where the merchant is based, total annual sales, and whether the merchant has a “presence” in the state where a customer makes a purchase. For example, Faggiano says a new law in Minnesota requires online sellers who maintain some inventory in the Gopher State to collect retail sales tax on sales to Minnesotans, even if the seller is renting or sharing storage space and has no employees in Minnesota.
Faggiano says he founded TaxJar last year to solve the complex problem that Internet sellers face in determining whether local tax rules apply for each order they fill.