As we have regularly reported, it’s clear the issue of collecting sales tax from Internet sales is long from resolved. As new versions of the Marketplace Fairness Act surface in Congress to address the issue of sales/use taxes that go largely uncollected, other marketplaces are starting to come to light, such as OpenBazaar, “A completely decentralized online marketplace that links individual buyers and sellers without an organized middleman (think Amazon, but without the intermediary of, well, Amazon).” Not only is Congress not yet ready to deal with our current Internet transactions, but if this kind of marketplace model takes off, they’ll really be scratching their heads!
By using Bitcoins as opposed to a country’s specific currency, OpenBazaar users are able to buy and sell internationally without the government being involved at all. In fact, the program isn’t run by an organization at all; it’s completely open-source, although it’s still in beta.
Of course, a decentralized online marketplace leads to a number of questions. Some, such as how users will be able to settle disputes, are already answered, but there are quite a few that are yet to be addressed, including (but certainly not limited to) the following:
- What kind of impact will it have on federal and state infrastructure, which is already dependent on income from sales taxes?
- How will major online retailers like Amazon and eBay need to adjust their business models?
- From a traditional sales tax perspective, transactions are for sales of tangible personal property, which are traditionally subject to sales tax – but where?
- How can we track the dollar value of a sale? The bitcoin model means that the price could fluctuate from one day to another. If sales tax WERE to be collected at all (in presumably the right state), what is the base price of the property purchased? And who is tracking it?
As we wait to see how the Internet sales tax debate and proposals like the Marketplace Fairness Act are resolved, it’s clear that we’ll need to keep an eye on decentralized online marketplaces like OpenBazaar, too. Keep an eye out here and on my social media accounts (LinkedIn and Google+) for the latest news!
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Competes Tax Credit and the California Manufacturer’s Partial Sales Tax Exemption. To learn more, contact us today at www.MilesConsultingGroup.com.
Photo Credit: LWYang