More sales taxes? Yep. This may happen. Big retailers are pushing Congress to impose a new law requiring online retailers to collect sales tax from out-of-state consumers. If this law passes, this could mean increases in the cost of online goods for consumers.
Internet businesses currently pay taxes to the state where the brick and mortar operations, such as a warehouse or offices, are held. If online retailers are selling to consumers to a different state, the retailer is not responsible for collecting that sales tax. This is due to a 1992 Supreme Court decision in the Quill Corp. v. North Dakota, 504 U.S. 298 case involving a mail-order business. By extension, that same ruling applies to online businesses.
If this law passes, this could mean that online retailers will be required to collect sales tax in over 9,600 jurisdictions, each having its own rates. This places a rather large burden on the smaller to mid-sized e-commerce companies. They would then be required to make significant and complex accounting and IT changes, file tax returns for the 46 different states that tax, and potentially get audited from those 46 states.
In addition to Internet retailers being responsible for collecting tax underpayments (currently in place), any overpayment made would not only not offset the underpayment but the states can keep the overpayment. In order for the smaller companies to stay afloat, a price increase would be necessary. The larger companies, such as Amazon.com, can afford to make all of these changes, and are in fact, one of the retailers for this law.
eBay is on the opposing team, and for the smaller retailers. Vice President for Government Relations and Deputy General Counsel at eBay Inc., on November 9, 2011, the day The Marketplace Fairness Act was introduced, stated,
“This is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors. It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity”.
Why not just collect sales tax on a national lever bases on a single set of tax rates and policies, then distribute to the states and districts according to receipts from those areas?
The next Senate hearing surrounding the possible sales taxes will be held Wednesday, August 1, 2012.