Earlier this week, the Senate voted on a landmark bill that would alter decades of settled law about the internet and sales taxes. In the bill, Congress would require that all online retailers (excluding small businesses with less than $1 million in out-of-state online sales) to collect sales taxes on all of their sales.
As many opponents of the bill note, this would place a heavy burden on small to mid-sized businesses, who would suddenly have to collect sales taxes in almost every state of the nation (each of which has different rates and exemptions). The reporting, collection, and remittance of such sales taxes would place a heavy burden on these smaller retailers, and give larger retailers such as Amazon, Walmart, and Target more of a competitive advantage.
This article provides a good overview of the bill, with a great map showing the Winners and Losers from this bill. Likewise, as it notes:
A 1992 Supreme Court case ruled that states could only require businesses to collect sales tax if the business had a physical presence in the state, such as a store or warehouse. Out-of-state retailers — back then the likes of catalogs more than websites — did not have to collect sales tax because it was deemed too difficult for them to abide by so many different tax jurisdictions and rules.
Now that online shopping has grown into a $226 billion-a-year business, and software makes collecting online sales tax across states easier, proponents of the Marketplace Fairness Act say requiring online businesses to comply with the same rules as bricks-and-mortar businesses is long overdue. The act would also require states to simplify their tax codes and provide retailers the software to assist in tax collection at no charge… States argue they’re missing out on much-needed revenue. Last year, states could have collected more than $11 billion in online sales tax revenue, according to a study by the University of Tennessee.
Of course, the bill still has to pass the House of Representatives, but it looks like it has a good chance of passage.
What do you think about this bill? Would it stifle growth at a time when our economy seems to just be getting back on track? Or, would it provide states with much-needed revenue?