Online Sales Tax: Will It Pass the Senate?

The proposal for an internet sales tax is going up in Senate and can shake up the future of online shopping, as we know it. This legislation would be an amendment to the Marketplace Fairness Act of 2013 that calls for the sales tax collection of "remote sellers" who make over $1 million, a number that some debate should be raised. Current law allows online retailers to collect sales taxes in states only where physical stores are also present. If a customer purchases something from an out-of-state retailer, they are supposed to pay a use tax, but this rarely occurs.  

Under this legislation, states would be also able to collect taxes from out-of-state sellers. The National Retail Federation in support of the legislation said the state governments lose money each year from purchases made online by their residents as evident in data collected by the National Conference of State Legislature (NCSL). Even if the stance manages to pass Senate, it will be non-binding — and may become a separate bill yet if it receives the 60 votes in Senate needed to move forward.

Of course, a piece of legislation of this merit is not without its pros and cons. 

PROS

1. Boost in Revenue for States: According to the NCSL, online tax can produce an extra $23 billion dollars for states, as reports states such as New York and California have the highest potential to reap in revenue at $1.767 billion and $4.159 billion respectively. 

2. Big Name Support and An Even Playing Field:  Businesses complain that current practices are leaving them disadvantaged because Internet sellers aren't bound to collecting sales tax. Furthermore, companies such as Amazon and Walmart are on board with the legislation, which makes sense considering they both have much to gain rather than lose with the deal.  

CONS

1. Big Name Opposition:  eBay is one of the frays arguing against the passage of an Internet sales tax. Brian Bieron, Director of Global Policy at eBay said of the legislation, "any Internet sales tax legislation, amendment or other legislative vehicle should include clear, direct and meaningful protection for all small businesses that are using the Internet."

2. Moot Points (and Small Businesses, Redux):  Delaware, New Hampshire, Montana and Oregon don't have a sales tax to begin with. As Senator Max Baucus (R-Mont.), Senate Finance Chairman brought up in a statement, "let me say it clearly: this is not Montana's tax. We have no sales tax. Montana businesses are not responsible for paying for the services and spending priorities in other states. Montana businesses are not responsible for paying for fancy software to play tax collector for other states. This amendment isn't just bad for Montana businesses, but small businesses all across America. The amendment provides no protections for small businesses or protections from aggressive tax departments in other states."