Internet Sales Tax Gains Support in Senate
One of online retailing’s big advantages could be dealt a serious blow in the future.
On Friday, the Senate passed a nonbinding amendment which would allow states to collect sales tax from out-of-state online retailers.
The amendment was part of the Marketplace Fairness Act and passed the Senate by a vote of 75-24. It was sponsored by Republicans Mike Enzi of Washington and Lamar Alexander of Tennessee, and Democrat Dick Durbin of Illinois.
The National Retail Federation advocates the passage of such a bill, since their brick-and-mortar businesses lose so much volume each year to online retailers. The NRF estimates that states annually lose $24 billion in unreported online purchases.
A 1992 Supreme Court case, Quill v. North Dakota, ruled that a business has to have brick-and-mortar stores in a state in order for that state to collect sales tax on the purchase from the retailer.
There are currently 46 states that have a sales tax, and consumers in those states are supposed to report their online purchases and pay taxes each year. However, very few consumers do.
The amendment would affect online retailers that did over $1 million in sales annually. States would be required to provide software to online retailers that would make it easy to compute the taxes.
The Marketplace Fairness Act would have to pass both the House and the Senate before any tax was imposed.