The Senate just passed a bill that will make certain large retailers charge sales tax to online shoppers. The bill will allow states to collect sales tax from goods sold via the internet. If it passes the House of Representatives and is signed into law, this law will mark the end of an era where large retailers such as Amazon and EBay benefit from a twist in the system that allows them not to collect sales tax from goods ordered online.
The U.S. Senate, overwhelmingly and with strong bipartisan support, passed the Marketplace Fairness Act of 2013 by a vote of 69-27. This bill will benefit states by allowing them to collect sales and use taxes on sales made to customers over the internet. Many felt that it was just a matter of time before this bill was actually passed.
Prior to the passage of this bill, there were several failed attempts to get around a 21 year old Supreme Court decision that banned sales tax on online purchases. EBay has been one of the most vocal companies pushing lawmakers to go against the bill. They, and many others, feel that small business owners will be the ones that feel the pinch of the online taxes.
The bill, if it is signed into law, will allow a state to require certain remote sellers to collect sales and use taxes on sales made to customers within the state. States that are members of the Streamlined Sales and Use Tax Agreement (SST) would automatically be granted this authority. Those in favor of the bill argue that it will benefit the states by giving them more money. White House Press Secretary Jay Carney said the Obama administration, after reviewing the bill and listening to the overwhelming support “from governors, mayors and the business community on the need for federal legislation to level the playing field,” is in favor of the bill.
Although the bill provides an exception for businesses with annual remote sales of $1 million or less, many feel that the bill will be the end of small businesses who sell goods over the internet. They argue that there will be a lot more work for each sale due to the required tax filings and the paperwork that accompanies them. In the end, they maintain, it may be too much work for the money.
How it the tax charged? This seems to be the only easy piece to this puzzle. Each state will give online retailers complimentary software that will calculate the sales tax owed based on the buyer’s zip code.
The legislation now moves to the House of Representatives where its fate remains uncertain. It will likely be referred to the Judiciary Committee for consideration.
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