That 1990s Super Nintendo System you've been eying on eBay for $79.97
might soon include an extra fee for sales tax, thanks to a bill up for
consideration in the Senate this week.
Senators are wrapping up discussions about the Marketplace Fairness Act,
better known by its nickname, the Internet Sales Tax. A vote to advance
the bill is expected Friday morning.
The proposed legislation would force many online retailers to begin
collecting taxes on their wares in all states, not just where they have
Any online store that makes more than $1 million annually in online
sales would have to send taxes back to the states where their goods are
delivered, based on the rates required in those jurisdictions.
In a time when states and towns are struggling to make ends meet, this
bill would mean extra revenue to make up for federal dollars lost to
sequester cuts. It's no wonder some lawmakers are looking to cash in on
what has become a sizeable chunk of American commerce.
Revenue from purchases made on the Internet in the United States has
grown steadily since 2003. That year, they made up about 1.6 percent of
total retail sales in the U.S. By 2012 they had risen more than
three-fold to 5.2 percent, bringing in $225.5 billion.
The bill can find support on the right despite many Republicans' pledges
not to raise taxes, because it does not subject any new items to
taxation. Online buyers legally should be paying these fees already, but
they rarely do. There is even a section in the bill called "No New
Taxes," that explains this.
Some big name retailers, like Amazon, have come out in favor of the bill.
But opponents say the act would impose a burdensome system on small
businesses that don't have the administrative resources to keep such
complex books. Retailers would have to determine how much to pay in
taxes on an item based on the thousands of tax jurisdictions in the
As an example of how that could get complicated, five states do not have
state-wide sales tax, but two of those states - Montana and Alaska -
allow localities to charge a sales tax. So a business owner in New
Hampshire - which has no sales tax - sending a fishing pole to a
customer in Juneau, Alaska, would have to collect a 5 percent sales tax,
but would charge no sales tax to the buyer in Denali Borough.
Althea Erickson, director of public policy for Etsy, an online
marketplace where crafters can sell their creative goods, wrote an op-ed
this week urging lawmakers to raise the revenue rate that
differentiates between small and big businesses in the act.
"If you're thinking, '$1 million, phew, that excludes me,' that's understandable," Erickson wrote
of the threshold for businesses affected by the bill. "$1 million in
sales, however, is well below other federal definitions of small
business. And the top 500 largest internet retailers make up 93 percent
of lost state revenues. A lower exception hurts small businesses more
than it helps states."
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