Senate Passes Bill To Give States Ability To Collect Online Sales Tax (updated)

[ProSense]

Senate Passes Bill To Give States Ability To Collect Online Sales Tax

By Travis Waldron

The United States Senate voted Monday evening to pass the Marketplace Fairness Act, bipartisan legislation that would close what is known as the “Amazon loophole” by giving states the authority to collect sales taxes on online purchases even when internet retailers aren’t based within their borders. That loophole gives online sellers an advantage over brick-and-mortar retailers that have to collect sales taxes on most purchases.

The legislation passed 69-27.

The new rules would apply to all retailers with sales exceeding $1 million a year should it pass the House of Representatives, where it is expected to face opposition. Amazon, the largest online retailer, now supports it, but eBay and other online outlets are opposed. eBay sent 40 million emails to its users in April protesting the legislation.

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Despite those concerns, the closure of the loophole will have big benefits for states and taxpayers. States have lost billions of dollars to the loophole at a time when tight budgets have forced them to cut back on education and other programs. Low-income taxpayers, meanwhile, will benefit because closing the loophole will make state sales taxes slightly less regressive. However, raising the exemption, as eBay wants to do, would significantly reduce those benefits, which have been sought by governors, including Republicans, across the country in recent years.

http://thinkprogress.org/economy/2013/05/07/1971541/senate-passes-online-sales-tax/

Roll call: http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=113&session=1&vote=00113

Updated to add:

The politics of online sales taxes

By Steve Benen

When there are 69 votes in the Senate for anything, it's an uncommon day in the chamber, but when there are 69 Senate votes for a tax bill, something unusual is going on...For the most part, Democrats supported the bill and Republicans didn't, but take a look at the roll call and note the non-traditional pairings. In this bill, several conservative Republicans from red states like Mississippi, Nebraska, and Alabama voted for online sales taxes, while more progressive Democrats from blue states like Oregon and New Hampshire voted against it...when Sen. Mike Enzi (R-Wyo.) votes for a tax increase and Sen. Ron Wyden (D-Ore.) votes against it, you know the "Marketplace Fairness Act" isn't the usual bill.

So, what's the story? The law currently only requires online outlets to charge a sales tax if the business has a brick-and-mortar building in the state. This system, in turn, creates a disjointed series of advantages and disadvantages -- it hurts local retailers who don't want to lose customers to Internet retailers, but it also hurts online outlets like Best Buy and Target which are trying to compete in both markets, and don't want to lose online customers to websites that won't have to charge sales taxes.

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What's more, Democratic and Republican policymakers at the state level, where sales-tax revenue is critically important, have also been pushing Congress on the issue...given all of this and the lopsided Senate vote, Internet sales taxes are on the way, right? Well, not just yet.

There's still the Republican-led House to consider...This is not to say the bill is DOA in the House -- it has 65 co-sponsors, almost half of whom are Republican -- but it may require House Republican leaders to once again consider circumventing the so-called Hastert Rule.

http://maddowblog.msnbc.com/_news/2013/05/07/18103701-the-politics-of-online-sales-taxes

Members of Congress have the power to change the economic equation, but they're refusing to act.
http://www.democraticunderground.com/10022796943

[trotsky]

1. Amazon supports it because they are working toward having distribution centers in nearly every state

They want the playing field leveled because their position on the field has changed.

Overall I hate sales taxes, they are horribly regressive. I wish we could do away with them entirely except for luxury items. But this is a reasonable bill - not taxing internet sales puts local businesses at a disadvantage.

[djean111]

2. As a very very small ebay seller (small sales, I am regular size :-))

that million dollar threshold applies to ebay, and affects me because I am selling through ebay?
But if I had my own web store, and made far less than a million dollars, it would not apply to me?
How many mom and pop brick and mortars make over a million a year?
I am asking because I keep reading that there is a million dollar threshold.

[edhopper]

3. I don't believe so.

It applies to the individual seller on ebay. So those with big ebay stores that do $1 million a year will be affected. But not the small seller.
At least that is what i understand it to be.

[MineralMan]

4. As a former online retail business owner,

I'd have little problem with this, as long as the system did not require individual filings for each state. That would be impossible for most small-scale businesses, to be sure. This could be handled through credit card merchant accounts, though, or through intermediaries like PayPal, since most online sales involve credit card payments.

I understand that they're exempting smaller online businesses, though, so perhaps it isn't really much of a problem. Larger businesses have accounting systems that could easily handle multi-state sales tax collection and reporting requirements. As long as it was phased in over time, the accounting software folks would accommodate their customers with this. Most already have such tools.

Now, how will this affect local businesses? Not very much at all. It also won't affect online retailers much, either. The larger ones will be able to keep prices lower than at local businesses, and most online shoppers really shop online for convenience, anyhow, although price is a factor on larger purchases.

How will it affect states? Massively. Being able to collect sales tax revenues from out-of-state online sales will be a big boost to state budgets.

When I was selling online, about 10% of my customers lived in the state where I did business, so I had to track locations anyhow. I filed a simple tax form every year in California and sent a check. My business was small enough that they only required annual filing. I did get audited one year, but the auditor who visited immediately grasped the fact that almost all of my sales were not subject to CA sales tax, so he was there only about half an hour. I showed him my reports of total sales by state, and that was enough information for him to just leave me alone thereafter. I never charged my CA customers sales tax, but just paid the sales tax on the total amount of their purchase. The auditor gave me a formula I could use that would save me a few bucks, but I told him it was just too much trouble for so few customers, and that I'd just continue overpaying and not charging the customers.

I'm into simplicity over profits.