Senate Approves Internet Sales Tax

May 07, 2013 2:05 PM  By

Internet-Sales-Tax-300The Senate has approved the long-anticipated internet sales tax proposal, which would require shoppers to pay sales tax for most of their online purchases, in a 69 to 27 vote. The legislation is now heading to the House of Representatives for a final vote before it can become law.

The proposal, also known as the Marketplace Fairness Act, “would allow the 45 states (and the District of Columbia) that currently charge sales taxes to require large online retailers to collect tax on purchases made by their residents. The law would only apply to online sellers that have sales of at least $1 million in states where they don’t have physical operations, like a store or a warehouse,” according to CNN.

If the bill eventually becomes law, CNN said, studies have found it would collect $12 billion in additional sales tax from online purchases every year.

The National Retail Federation’s president and CEO Matthew Shay issued a statement immediately following the Senate vote in which he applauded many senators for approving the proposal.

“Today’s action in the Senate is a significant step for sales tax fairness and we look forward to a robust debate in the U.S. House of Representatives,” Shay said.

Shay also said, “This bill and its companion in the House will level the playing field for all retailers – both online and off – while safeguarding states’ rights. And the bill does it all without raising taxes, new government mandates or adding to the deficit.”

But not all retailers are happy with the Senate’s decision. Brian Bieron, Senior Director of Global Public Policy at eBay Inc., issued the following statement in response to the approval of the Marketplace Fairness Act:

“The contentious debate in the Senate shows that a lot more work needs to be done to get the Internet sales tax issue right, including ensuring that small businesses using the Internet are protected from new burdens that harm their ability to compete and grow. eBay will continue to focus on bringing greater balance to the legislation by protecting small businesses with less than $10 million in sales or fewer than 50 employees.”

  • Kim Snyder

    As a small business owner online, this tax bill is a bit scary. At least they had the right mind to leave those of us who do not make over 1 million a year alone. Can you even imagine what it would be like to have to collect tax from everyone out side your home state? And then be sure to pay that tax to each state? That would be crazy to even think of the extra work its going to take to do it.

    • William Buckley

      Same here but we are over the proposed 1M cut off mark by quite a bit and we are scared witless. How large do they think we are? We cant afford to implement this. our larger competitors who can hire this stuff out are going to eat our lunch when it comes to compliance. Plus with the larger margins they have I predict sites like those will end up just paying for the tax like the free shipping offers that us little companies had to swallow. This law is coming from people that have no clue what the challenges are for business of our size. Im all for fairness so I think after they foist us on this law they should make B&M charge a shipping fee on all sales.

      • Kim Snyder

        I heard that when they ok’d this and someone made who is against it said how do you think it going to be done? Those for it said.. oh there is software that will figure it out.. OH Please the USPS module for shipping can’t get it right after all this time being on the web, how do they expect software to figure out taxes that change pretty much from city to city? When Amazon, eBay, Overstock get in the same bed together and are against this? You know its a bad idea.. those big guns don’t like each other, but here they are united against a cause. Those who are making the law are so out of reach and totally clueless of what happens in the real world these days. They need to take fairness out of the title, because its about as unfair as possible.

  • Linda

    Although I am not for this new tax statement, at least they are leaving the small business owners alone for now!

  • Skeptical_Observer

    In keeping with the lack of intelligence of our legislators, they failed to consider the law of unintended consequences. It basically will screw small businesses. This law is favored by large businesses as it will help prevent small businesses from getting larger. I live in GA, that has over 150 different taxing entities (counties, cities within counties, states). Almost all my sales are outside GA but it still takes 4 to 5 hours to do the monthly sales tax report. If a small businesses tries to grow and reach $1MM in sales, they will need to hire at least one, or even more, people just to do the accounting for the reporting and submission of funds to the various states. These added employees won’t contribute anything to the profit. All they will do is add to the overhead. So, like the Obama health care enema that he shoved up the backside of small business, it’s going to keep small businesses from growing so they can avoid the additional burden that will be heaped upon us.

  • Sheeny

    Being a very small internet seller, I think this whole tax thing is too complicated to ever pass. But eventually, we will see an ‘internet sales tax’. It doesn’t matter how many states currently have a sales tax or how many different taxing entities within a state.

    All the Fed gov. needs to do is take an average of the existing state’s sales tax and have selling venues charge the avg. flat tax on each sale and payment processors charge the tax when no venue is involved.

    The venue and payment processor then submits the collected tax to the Fed. gov.
    along with the state it was shipped to. Fed. distributes it to the states based on what was reported by venues and processors. States take care of the entities within their state.

    Let’s say a state now has a sales tax of 10% but does not collect internet sales tax. The avg. ends up being 7.5% and now they are getting something they didn’t have before. As for state without a sales tax, they benefit by receiving sales tax from buyers from within their state. If they didn’t want to pay the tax, then they shouldn’t shop online.

    This could be a blessing in disguise, because once a state starts receiving internet sales tax, even though it could be lower than their current rate, the argument could be made that the current state tax rate could be lowered to match the Fed’s average. In the long run, a state would still get more tax revenue.

    If you sell online and take payment via credit cards, then that company is the payment processor and collects the tax. So you end up with eBay, Amazon, etc. along with PayPal, AmEx, Visa, MC, etc. becoming the collectors of the tax.

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  • ChipW

    To all 45 states want me to collect taxes from your citizens: I’ll collect your citizen’s sales tax, if you pay for their shipping costs. Then I have Nexus in your state.

  • TractorUP

    Same here. Small, 2 person online business over the threshold. We’re close enough to seriously consider shrinking to avoid this. We’re not going to be able to do it. “Main St” isn’t in trouble of the tax issue- and the internet isn’t going away with this bill. We’ve done quite a bit of digging and this bill is by and for Wal-Mart, Best Buy, Home Depot, etc- those that already seriously wounded “Main St” years ago. I wonder how many new tax dodgers this will create, as well?