A bill expected to be introduced in Congress early next week by Sen. Mike Enzi (R-WY) and Rep. Bill Delahunt (D-MA) could eliminate the days of tax-free Internet shopping. The exact language of the bill has not yet been revealed.
According to CNet News, Americans who currently buy products online from out-of-state vendors are not always required to pay sales taxes. After nearly a decade of debate on the issue, pro-tax officials are pressing Congress to enforce the same sales tax on Internet purchases as brick and mortar businesses do. Now, in the midst of a nationwide recession forcing states to grasp for additional revenue, this is the first time the proposal could actually garner enough support to pass.
Opponents of the bill include the Direct Marketing Association, the Electronic Retailing Association and companies such as eBay, Overstock.com and L.L. Bean, reports CNet. Complaints against the proposed bill include the incredible complexity of state tax laws that rule which items should and should not be taxed, as well as the presence of thousands of different tax agencies.
Supporters of Internet retail taxing responded to these complaints of complexity in 2002 with the creation of the Streamlined Sales Tax Project (SSTP), which now consists of about 20 states agreeing to simplify and unify their tax codes. Many online retailers disagree with the actual effectiveness of this project, claiming the states have no real intention of simplifying the tax laws and are instead using the SSTP as a tool to get the legislation passed quickly. Missing from that list of members are major states California, New York, Texas and the five Deep South states, reports various media sources.
Under current law, there is a caveat stating that online shoppers are required to pay a state “use tax” voluntarily reported on their tax forms, says CNet. Customers are expected to calculate how much they owe and the state to which they owe it but that rarely, if ever, happens.
The only exceptions to the current collection method include cases in which large online retailers have physical offices in certain states, the media reports. States and municipalities apparently dislike the current system, but only New York has fought to collect the tax.
