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2.5.13

Internet Sales Tax bill: The Marketplace Fairness Act



 
Many are wondering about a bill that was introduced in U.S. Senate recently. The Marketplace Fairness Act (S.B. 743) was introduced by senator Michael Enzi (R-WY) on April 16, 2013. This bill is designed to allow states to collect sales tax on online sales. As it is now states can only require online companies that have a brick and mortar presence in that state.

According to supporters of the bill it would be a big win for local businesses and finally level the playing field between them and the online retailers such as Amazon, overstock.com, and even Walmart. Over the last several years many governors both Republican and Democrat have asked the federal government to step in and pass a law that allows states the ability to recoup these lost sales tax revenues. Also, they say that state and local governments lose out on billions a year in tax revenue due to not being able to collect these taxes. States missed out on roughly $23 billion last year because they were not able collect taxes on out-of-state sales according to The National Conference of State Legislatures. Some even feel that the days of big online retailers putting the squeeze on Main Street businesses will be a thing of the past if this bill makes it through Congress. Bill Hughes of the Retail Industry Leaders Association said "The special treatment of big online businesses at the expense of retailers on Main Street will soon be a thing of the past,"

Amazon is one online seller who is supporting this bill. According to Wonkblog over at The Washington Post this has two reasons: "For one, the company is big enough that collecting these sales taxes will be more of a burden to its smaller competitors. Second, Amazon has been moving to same-day shipping and is setting up physical warehouses in just about every state — so, increasingly, it’s already required to collect sales tax under existing rules anyway." Some smaller online retailers such as eBay have said they would possibly support this bill as well, if the exemptions for smaller retailers were increased from $1 million to $10 million in out-of-state annual sales. This would prevent smaller online sellers from feeling the squeeze that their larger competitors such as Amazon would not feel under this law.

Those that oppose the Marketplace Fairness Act say it is unfair to allow states to collect taxes on sales made online. They claim it puts an unfair burden on smaller online retailers by forcing them to spend time and money to collect these taxes from every state and locality in the nation. The acting president and CEO of The Securities Industry and Financial Markets Association Ken Bentsen, a lobby group for the finance sector, says “The bill could lead to unexpected costs being passed on to consumers of financial services, including sales taxes on services or state-level stock transaction taxes.”as mentioned before smaller online retailers feel the exemption limit of $1 million of annual out-of-state sales will place an undue burden on their businesses. To some this is seen by many simply as a way to squeeze out smaller competitors by larger online retailers such as Amazon and Walmart.

Some will say that we should just leave it to the states to solve this particular problem. The problem with this is that several states have already tried this with different laws that may or may not be constitutional. States are simply asking for help from the federal government to make the uniform Law across the country. That would make it easier to collect sales tax from online sales.

This bill will not have any effect on residents of the states that do not collect sales tax. Furthermore, this bill will not change the percentage of sales tax that you would normally pay at any store. This bill will simply make sure cities and states will have the ability if they choose to collect sales tax from sales made within their borders. Also, this bill would also require that states that want to collect sales tax from online sales would first have to simplify the way in which they collect online sales tax to be uniform with other states. After this the states would have to give retailers software to help them with the calculation of sales tax due to the particular state.

Even if this bill passes the U.S. Senate, as it appears poised to pass with a large bipartisan majority when Congress returns To Washington DC next week, it will face an uphill battle in the US House of Representatives. Many Republican representatives view this bill as a tax hike on the American people. There appears to be some split within the GOP in the U.S. House on the tax hike opinion.  Some Republicans seem to understand the plight of Main Street small businesses and their local cities and states. So there is a chance this bill will make it through Congress and make it to the desk of President Obama, who the White House says will most likely sign the bill into law.



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