Andre Yoskowitz
6 May 2013 20:50
The Senate has passed a bill that will allow states to tax online sales, even if the retailer does not have a brick-and-mortar presence in the state.
Passed by a margin of 69 to 27, the bill will now head to the House where it is expected to see bigger resistance despite a public backing by President Barack Obama.
Currently, states can only require retailers to collect sales tax if they have a physical presence, whether a retail store or a headquarters or a distribution warehouse. Online retailers (in most states) do not have to collect sales tax, including behemoths like Amazon and eBay and major online retailers like Newegg and TigerDirect.
The bill would require businesses with revenue above $1 million to collect taxes for all products they sell online, through radio and in catalogs. The sales tax would then have to be sent back to the state where the shopper lives.
Critics of the bill claim small retailers will have expensive obligations now to figure out sales tax rules for 50 states and collect and remit such taxes at varying rates. eBay has been a massive opponent of the bill. Says eBay president John Donahoe: "Giant retailers have a requirement to collect sales taxes nationwide because they have physical presence nationwide. Likewise, today small retail stores and online retailers collect sales taxes for the one state where they are located. That's a fair requirement."
"If the bill passes, small online businesses would have the same tax compliance obligations and face the same enforcement risks as giant retailers, despite the fact that they are usually located in just one state."
Last year, Internet sales in the U.S. totaled $226 billion, up 16 percent from 2011.