The US Senate Just Passed That Internet Sales Tax Bill

Illustration for article titled The US Senate Just Passed That Internet Sales Tax Bill

That massive online sales tax hike that senators were pushing through? Yeah, it's looking more and more likely. The US senate just held a final vote on the Internet Sales tax issue and it passed 69-27, getting support from both Democrats and Republicans.

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The way online sales tax works right now is that states can only collect taxes from online retailers if those retailers have a brick and mortar store within the state. No more, under the Marketplace Fairness Act, the new law will let states collect sales tax from any online retailer (as long as they do more than $1 million in sales).

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Now that the Senate has passed the bill, it'll move on to the House of Representatives. President Barack Obama will supposedly support the Internet Sales Tax measure.

[AP, Ars Technica]

Image by carroteater / Shutterstock

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DISCUSSION

This isn't a "massive tax hike." This isn't a increase in taxes at all. This is a change in enforcement of taxes.

In most states that collect sales tax, residents of that state are responsible for reporting purchases made out of state (typ. orders made online or via telephone) on their annual income tax form (or, sometimes, a separate "sales and use tax" form or schedule). The problem is that there has been no enforcement of this; the states simply can ask nicely. As a result, few people actually do this, and as more and more people buy online, states are getting hit with rather noticeable sales tax shortfalls, which has a direct impact on annual budgets.

In addition, this puts local businesses that are currently required to collect sales tax at a distinct disadvantage to internet vendors who aren't. This levels that playing field, and requires the internet vendors to collect the sales tax that people were already supposed to be paying but weren't.