May 9, 2013
About That New Internet Sales Tax
It really goes without saying, but for lack of a better intro, I’ll make the understatement of the decade.
The Internet is a much different place than it was in the 90s.
The lingo is different, many of today’s large web companies weren’t around in the 90s and even much of the technology is improved over that which was used some twenty years ago.
So it makes sense for the government to go back and revise some of the old laws that were passed in the 90s before anyone knew the Internet would be the thing it is today. Ah, but change can be difficult, especially when it tries to dip into your wallet.
On Monday, the US Senate passed the Marketplace Fairness Act, a bill that would allow states to collect sales tax on items sold online. Though the bill still needs to be passed through the House, it has many small online businesses worried.
Large businesses, your Amazons and your Apples of the world, won’t have too much trouble implementing these measures. After all, they sell enough inventory and have access to tools which would make calculating sales tax an easy affair. Yet smaller companies, such as eBay resellers, could end up feeling the pinch if they sell enough items outside of their state. In a USA Today article, one eBay electronics store owner said she would stop selling used iPads if the bill was passed because there isn’t enough profit margin to afford cutting out a state tax.
In 1992 the Supreme Court ruled that states could only require sales tax from businesses that had a physical presence in the state. At the time, this law made more sense for catalog and telephone shopping businesses than websites. It was assumed that figuring out the specific sales tax for each buyer would be too arduous and difficult. It’s not so difficult to collect sales tax online these days, and with the online retail marketplace as large as it is ($226 billion each year), some politicians feel it’s time to ask online sellers to start behaving more like brick and mortar stores.
Should the law pass, states would be required to provide online retailers with the necessary software to calculate and collect sales tax.
Believe it or not, there are some rather large businesses that support this bill. Target and Amazon, for instance, support the bill along with a handful of Democrats and Republicans and President Obama.
It may not surprise you to know that small brick and mortar stores also support this bill. After all, these stores have been screwed by online retailers for years. Who of those amongst us hasn’t gone into a Best Buy to check out that new TV or get hands-on with some other product only to walk out of the store having just purchased said item on Amazon.com at a significant savings?
According to CNN, Amazon was opposed to this bill, but as they look to expand they’ve changed their tune.
eBay has also been an outspoken opponent to this bill. As a business built on small retailers, it would behoove eBay to keep this bill at bay.
If the bill is passed, the earliest online stores could start collecting state sales tax is the first of October, 2013. It could also bring in a combined estimated $23 billion in tax dollars to the states.
Image Credit: Photos.com