Senate bill lets states tax Internet purchases

Published on NewsOK Modified: May 6, 2013 at 8:22 am •  Published: May 6, 2013
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WASHINGTON (AP) — Attention online shoppers: The days of tax-free shopping on the Internet may soon end for many of you.

The Senate is scheduled to vote Monday on a bill that would empower states to collect sales taxes for purchases made over the Internet. The measure is expected to pass because it has already survived three procedural votes. But it faces opposition in the House, where some Republicans regard it as a tax increase. A broad coalition of retailers is lobbying in favor of it.

Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state.

That means big retailers with stores all over the country like Walmart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don't have to collect sales taxes, except in states where they have offices or distribution centers.

As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.

The bill would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the states where a shopper lives.

The measure pits brick-and-mortar stores against online services.

As Internet sales have grown, "It's putting pressure on the brick-and-mortar competitors and it's putting pressure on state and local sales tax revenues," said David French, senior vice president of government relations for the National Retail Federation. "It's time for Congress to create a level playing field so that all retailers are treated fairly."

On the other side, eBay says the bill doesn't do enough to protect small businesses. Businesses with less than $1 million in online sales would be exempt. EBay wants to exempt businesses with up to $10 million in sales or fewer than 50 employees.

"Complying and living under the tax laws of 50 states is a major undertaking because the process of complying with tax law goes far beyond just filling out the right forms," said Brian Bieron, eBay's senior director of global public policy.

"You have to deal with the fact that all of these government agencies can audit you and can question you and can actually take you into court and sue you if they think you are doing something wrong," Bieron said.

Supporters say the bill makes it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don't have to send them to individual counties or cities.

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