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Should The Senate Pass Online Sales Tax Legislation? [Updated]

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Should The Senate Pass Online Sales Tax Legislation? [Updated]
[ Business]

Update: It passed.

Currently in the U.S., state governments are only obligated to collect sales taxes from online retailers that are based in their own states. If an online sales tax bill makes it to law, states could collect from online retailers that don’t reside in their state.

Should online retailers have to pay taxes to states where they don’t reside? Let us know what you think in the comments.

There’s a good chance you’ve heard of the Marketplace Fairness Act (S.336), before. The bill aims to ensure that states receive taxes that they’ve been otherwise missing out on. A similar proposal is up for vote in the Senate this week thanks to an amendment to a Democratic budget resolution from Senators Mike Enzi and Dick Durbin (pictured), who sponsored the bill.

Opponents are slamming the Senators for trying to “sneak” the legislation through. The Hill reports:

Phil Bond, the executive director of the WE R HERE coalition, accused backers of online sales tax measures of trying to “sneak through” their legislation outside regular congressional order.

“There are good reasons this policy hasn’t been considered in the US Senate for over a decade: Taxpayers don’t like it, it turns the Internet into a tax collection platform, it allows state tax collectors to exercise authority far beyond their boundaries and it will put thousands of small businesses out of business,” Bond, a top Commerce Department official under George W. Bush, said in a statement.

The official summary of the Marketplace Fairness Act says:

The Marketplace Fairness Act grants states the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction – exactly like local retailers are already required to do. However, there is a caveat: States are only granted this authority after they have simplified their sales tax laws.

Simplification is required because of two Supreme Court rulings (Bellas Hess and Quill, described below) cite concern that collecting sales tax for multiple states would be too difficult.

The Marketplace Fairness Act requires that states must simplify their sales tax laws in order to ease those concerns and make multistate sales tax collection easy. Specifically, states seeking collection authority have two options for simplifying their sales tax laws.

Under the Marketplace Fairness Act, states can join others that have already adopted “simplification measures” of the Streamlined Sales and Use Tax Agreement (SSUTA) or they can meet five mandates listed in the bill. States would have to agree to:

  • Notify retailers in advance of any rate changes within the state
  • Designate a single state organization to handle sales tax registrations, filings, and audits
  • Establish a uniform sales tax base for use throughout the state
  • Use destination sourcing to determine sales tax rates for out-of-state purchases (a purchase made by a consumer in California from a retailer in Ohio is taxed at the California rate, and the sales tax collected is remitted to California to fund projects and services there)
  • Provide free software for managing sales tax compliance, and hold retailers harmless for any errors that result from relying on state-provided systems and data

You can take a look at the bill here. Hundreds of national trade associations, state and local trade associations and businesses support the bill. These are listed here. They include Amazon, Autozone, Barnes and Noble, Bed, Bath, & Beyond, Best Buy, Buy.com, Foot Locker, Gap, Home Depot, Kroger, Lowes, Meijer, J.C. Penney, Safeway, Sears, Petsmart, and Walmart, to name a few.

The bill’s site only lists ten opponents, including: eBay, American Catalog Mailers Assocation, Americans For Prosperity, Campaign for Liberty, Center for Freedom and Prosperity, Computer & Communications Industry Association, Competitive Enterprise Institute, Direct Marketing Association, Freedomwworks, Heartland Institute, Heritage Foundation, National Taxpayers Union, NetChoice, R Street, TechNet, and We R Here Coalition.

AT&T, Council on State Taxation, National Cable and Telecommunications Association, National Federation of Independent Business, and Verizon are listed as neutral or undecided.

The main difference between the Marketplace Fairness Act, and what is coming up for vote this week, is that the new proposal doesn’t include the mandatory simplification, and is non-binding, as CNET’s chief political correspondent Declan McCullagh explains.

“It appears to be intended as a clever political hack: secure plenty of votes on a non-binding Internet tax amendment, then use those vote totals to argue there’s sufficient support for S.336 when it’s up for a binding vote later,” he says, before going to quote eBay’s senior director of federal government regulations and global public policy, Brian Bieron:

“The strategy of the bill’s supporters is to offer this general amendment and then claim that all the senators that vote for it support the bill. That is not just a stretch, it is not accurate. But the game plan is to rack up a sizable vote and then make the claim the bill itself should jump over the Finance Committee and go right to the floor.”

Hence the “sneaking” accusations.

Some supporters of the legislation think it’s really just a matter of when, rather than a matter of if, and whatever happens with this week’s vote could have a significant bearing on that.

Either way, brick-and-mortars have ramped up their lobbying for online sales tax, but opponents claim it’s bad for consumers and for small businesses.

Do you think the proposed online sales tax legislation is bad for small businesses? Consumers? Let us know in the comments.

Should The Senate Pass Online Sales Tax Legislation? [Updated]
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  • Rob G.

    No on internet taxation. We already pay tax when we eat, buy gas, Use a phone. A small start up or someone starving just selling their stuff (much of which they already paid tax for when they got it) (one of a kind items)(stuff from your house you no longer need or want) is simply wrong, unwise, foolish, stupid. We need to be able to vote on how tax money is used. Tax all those damn commercials online. Leave the little people. The 99.9% of us alone. Stop trying to tax freedom of speech. Taxation between States would be a muddy mess anyway. Should not be done. Maybe in 20 years or when we have single payer not for profit health care.

  • //n/a...lol radford

    WE DON”T LIVE IN A DEMOCRACY … WE LIVE IN A MONEYARCHY !

    I know, I know … it is not a democracy – it is a republic. A republic run by the lawyers. Tell me I’m wrong.

  • //n/a...lol radford

    The key word here (“Should on-line retailers …”) is ON-LINE! Tax the internet??? What a concept!
    Greed is everywhere! And lawyers are right in the middle….

  • me

    dont do it and while they are doing their work…hh…lets give them the same health we all have and not a special program the have. pay for work. they need diapers and bottles like the babies they are

  • John

    Don’t let it happen. It is BB and greed

  • http://atticdiggers.com WAHM

    Sales tax is the most regressive of taxes. It hurts the little guys most. And no matter what they say, this will put a lot of small businesses out of business.

    This law is another way for the corporations to rid themselves of all competition. And another way for the greedy rich to steal from the poor, as the social safety net is cut again and again in favor of other programs to aid “business” and “job creation” (which, if you’ve noticed, never happens, though the tax money is spent.)

  • http://www.em3marketing.com Janyer Dominguez

    I say they should if they intend to invest a good percentage of the tax revenue to increase the internet connectivity speeds and expand WiFi in public areas. They can use the rest to pay down the national debt.

  • http://www.richmondcomputer.com Jon Frey, Richmond Computer

    Charging sales tax for online sales is not standardized. For example, when ordering hardware from Dell, they will charge you sales tax if you’re not a reseller or otherwise tax exempt, but other online resellers won’t. At minimal, the government needs to standardized the practice. Either charge it or don’t.

    As more commerce is conducted online, its likely that eventually the government will have to rule in favor of, government.

  • Frank Xappa

    So does this mean if the internet company picks up the phone and we pay via voice we dont have to pay the tax then – only if the transaction is online?

  • Robert

    No, I don’t support the ideal of the Senate.

  • Nathan

    Read this before you say no to this bill. If this doesn’t get passed, states will continue to issue nexus tax bills killing small business affiliates: http://www.amnavigator.com/blog/2013/02/15/marketplace-fairness-act-affiliate-nexus-tax-eliminator-in-congress/

  • http://me.com me

    Abolish all parts of the Federal Government EXCEPT National Defense and Border Security. Hand over all the other aspects of Government back to the States and FIRE all the members of Congress. Let the States take care of their own Citizens. If a State cannot keep it’s budget straight,sell off parts of it to neighboring states until it’s gone.

    Charge all the Federal Politicians with TREASON and deal with them as was done 200 years ago. Firing Squads,ropes and trees or quarter them with Horse pulls.

    How’s that sound? I know the Left leaning,do gooder liberal pansies won’t like it,so send them to France where they belong.

    A.Bunker

  • http://www.graciousstore.com Nina

    I think it will be the worse act of greed for Senators to pass a law for on-line retailers to pay tax to states where they do not reside. Such act will simply destroy the on-line retail stores. On-line retailers cannot afford to keep track of sales tax for every state and remit theses sales tax quarterly or however each state requires the sales tax to be remitted.

  • Clint

    It looks like the money is running out for many states so they are getting desprate to raise money at the cost of the small guy. Big Box Retailer love and back this online sales tax, to harm smaller sellers trying to make ends meat, so the big box retailer can have more of the greed money pie.
    If a National sales tax must be impossed to submit sales tax to all 50 states might be to much papaerwork and hassle unless you are a big dog.. If any tax must be impossed It might be better to submitt the money to one place, like helping to Refund social security and medicare so the elderly won’t be seen eating out of garbage bins. In the end! the everyday consumer will be the one to pay the tab.

  • john

    No! The cost of collecting these taxes would be overwhelming to the small business. Different rates for each state. Keeping track of the collections, filing deadlines and requirements of each state being different. The cost will have to be passed on to the consumer. Small businesses now only serves as a tax collection device for governments as it is, this would push things over the clift.

  • Donna Varesi

    It seems the complexities of taxing online retailers across state lines will add a tremendous hardship to small online retailers. Another piece of legislation that has no plan how it will be carried out but let’s do it anyway. I am becoming more skeptical of the intelligence, lack thereof, of our legislators at the same time incredulous of the enormous size of their egos.

  • Mike

    Absolutely not! It’s bad enough that we have to pay local taxes….now they want to squeeze us some more and try to get us to pay taxes to states where we DON’T live? Are they kidding? How about the Senate giving back some of that easy money they make ( and it’s a lot!) seeing that we’re the one’s that made it possible for them to make…not to mention that we even gave them the right to give themselves raises anytime they like and giving us no say in the matter! What’s THAT all about? NOOOOOOO, no out of state taxes for internet buyers, not now, not never!

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