Internet Sales Tax

The issue of an internet sales tax has resurfaced with a bi-partisan bill that was introduced in the Senate last week. It resulted in part from an agreement between Amazon and the State of California several months ago that will require Amazon to collect sales tax at the time of purchase on all sales to residents of the state starting next year. (what starts in Cali......)

The Marketplace Fairness Act would apply to internet sales NOT internet access. A Supreme Court decision in the '60s and again in the '90s ruled that a catalog seller was not required to collect state sales tax unless it had nexus or a physical presences in the state. More recently, the decision has been applied to online sales as well as catalog sales. Several years ago, Congress also imposed a moratorium on taxing internet sales where there is no nexus because of the difficulty of online businesses complying with so many different state/local sales tax options. This bill would effectively overturn that moratorium.

It is estimated that state and local governments are losing $15+ billion/year in lost sales tax revenue.

The proponents argue that it would level the playing field between brick and mortar stores and internet sellers/virtual stores. The opponents argue that it would hurt the small online sellers and is still too difficult to administer.

This bill would exempt online sellers with gross sales of less than $500,000.

With that provision, I am leaning to the side of the proponents, although I have concern that it might still be more beneficial to the big online sellers (who already collect the tax because they have stores in most states) and hurt those smaller online sellers.

http://marketplacefairness.org/what-is-the-marketplace-fairness-act/

http://www.cbsnews.com/8301-205_162-57321644/internet-sales-tax-an-idea-whose-time-is-now/

 

Why not just set up a standard rate for internet sales tax that will be paid to the State in which the buyer lives.

That wouldn't be complex.

 

Legally, the buyer should be reporting online purchases and paying the taxes when they file. This does not happen because of a combination of ignorance and willful fraud, and this proposed law would make it easy for states to collect taxes to which they are entitled. I won't lie, I'm going to miss tax-free large purchases, but this updates outdated laws to be more with the times and I'm OK with that.