online shopping

I always like how they stick a name on a bill to make it obscure what it really is. Like this year’s “Marketplace Fairness Act” in the Senate and the “Remote Transactions Parity Act” in the House. Sounds good, doesn’t it? Shouldn’t it really be named the “Tax Online Purchases” bill? If passed, it would make purchases you make on-line more expensive.

It’s always been a sore point for local businesses and state governments that on-line retailers could often escape collecting – and paying – tax for online purchases. The same item was cheaper on-line than it was buying at the store simply because the tax was eliminated.

The Senate bill would “require all sellers not qualifying for a small-seller exception (applicable to sellers with annual gross receipts in total U.S. remote sales not exceeding $1 million) to collect and remit sales and use taxes with respect to remote sales.” So anyone with sales exceeding $1 million annually would need to collect tax.

“Right now, thousands of local brick and mortar businesses are forced to do business at a competitive disadvantage because they have to collect sales and use taxes and remote sellers do not. This legislation promotes internet fairness by putting Main Street businesses on a level playing field with online retailers.” – Senator Mike Enzi of Wyoming

The House bill would “grant States (the) authority to enforce State and local sales and use tax laws on remote transactions.” The House bill also sets a threshold for tax collection, but at a much higher gross sales of $10 million per year.

A 1992 decision by the Supreme Court, a state can only collect taxes for an online retailer if they have a physical location in the state. Most states require tax filers to pay taxes for online purchases when filing their taxes each year. Few actually do. The bills would allow states to demand even out-of-state retailers doing business online without a physical presence in the state to collect taxes.

The bills would allow states to require out-of-state online retailers to collect their sales taxes.

“We believe the Marketplace Fairness Act would allow the states to close this significant and growing loophole in our sales tax revenue and level the playing field for all sellers regardless of the medium used to conduct a transaction.” – Illinois Senator Pamela Althoff, Maryland Delegate Sheila Hixson, and Utah Senator Curt Bramble in a statement