The Marketplace Fairness Act that will allow states to collect sales taxes for online purchases is facing opposition from a select group of senators whose states don’t tax sales.
Current laws allow states to charge sales tax on online purchases only if the vendor has a physical presence within the state’s borders. This results in a huge amount of internet sales going completely untaxed. A result of this is that it is difficult for brick and mortar stores to compete with online vendors, since most consumers would rather wait a few days for their purchase to arrive than pay the sales tax. The inability for states to charge their sales taxes on the internet cuts into their revenue significantly. In fact, the National Conference of State Legislatures estimates that states missed out on $23 billion, from $226 billion of online sales that would have been otherwise taxable. That’s $23 billion that could have gone back to the public to improve infrastructure or education, an average of $500 million for each of the 46 states that charge sales taxes.
Opponents of the bill argue that it forces the states where these online retailers are based to collect the taxes of other states and that the regulations it would create would be too complicated. They also argue that it doesn’t offer enough protections for small businesses, despite the fact that businesses whose online annual sales total less than $1 million dollars would be exempt.
Senate opposition to this bill is small, but its few opponents are trying to do everything they can to delay the vote. However, opposition in the house may be much stronger. Senate majority leader Harry Reid vows that this bill will receive a vote before the senate is dismissed for vacation next week, which is great because this is really a no-brainer. If people get upset about others using overseas bank accounts to avoid taxation, they should be similarly upset about those who specifically make purchases on the internet to avoid taxation.