The Senate is likely to pass a bill allowing states to require online retailers to collect sales taxes. The aim of the proposal is to make it easier for brick-and-mortar businesses to compete with digital ones, writes The Washington Post’s Jia Lynn Yang:
Since before the dawn of Internet shopping, the basic rule was that as long as a retailer didn’t have a physical presence in the state where the consumer was shopping, the company wouldn’t have to collect a sales tax. Technically, shoppers are supposed to track these purchases and then pay the taxes owed in their annual tax filings. Few people, however, do this or are even aware of it.
The result: Online retailers have been able to undercut the prices of their non-Internet competitors for years. Over time, shoppers learned that they could browse products in the aisles of a Best Buy, only to click “purchase” on their smartphones for a tax-free deal from an Internet retailer.
The proposal could bring state and local governments around $11 billion in revenue, money that is owed under existing law, yet is rarely collected in practice. But the bill has its critics, according to The Post’s J.D. Harrison:
Small business groups and anti-tax conservatives warn that online merchants would face a nearly impossible task of tracking and charging the appropriate sales tax rates for customers who live in any number of the country’s roughly 9,600 state and local taxing jurisdictions.
The bill does include an exemption for businesses with less than $1 million in interstate revenue to make it easier for smaller companies to comply, but eBay chief executive officer John Donahue argues that the exemption should be expanded. He asked his company’s customers by e-mail to lobby their legislators to delay the bill’s passage, The Post’s Hayley Tsukayama writes:
The exemption should cover retailers making up to $10 million in out-of-state sales or that have fewer than 50 employees, Donahoe said in the letter. This is “reasonable exemption that would protect the small guys and allow them to grow and compete,” his e-mail said.
Amazon, perhaps surprisingly, supports the legislation, notes Brad Plumer at Wonkblog:
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.