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Monday, September 9, 2013

Internet Sales Tax

In May 2013, the US Senate passed the Marketplace Fairness Act which would require online retailers to collect sales tax for the states to which they ship goods.  The act has to be passed by the House before it becomes law.   The discussion is quite heated.  When it will be passed or if it will be passed is difficult to call.

The issues…
As online commerce grew, shoppers often did not pay sales tax.  Online retailers were required to collect taxes only in those states where they had a physical presence: a retail store, a distribution center (brick & mortar).  It wasn't that sales tax wasn't due, but that it was too complicated to collect. States, counties, and other municipalities have varying rates and tax different items.  Keeping track of all the tax details was considered a burden for businesses. Most states require shoppers to keep track of online purchases and report and pay sales tax through their state income tax filings. Many taxpayers are either not aware of this requirement or choose to ignore it.  Online commerce has grown exponentially.  Uncollected sales tax is estimated to be in the tens of billions of dollars; revenue sorely needed by the states.