Senate passes bill paving way for states to collect tax on online sales.
While some or the larger online retailers have recently voluntarily started collecting state sales taxes for states to which the retailer currently ships products, today, May 6th, 2013, the Senate passed a bill that could end tax-free shopping on the Internet for many online shoppers.
The Senate voted 69 to 27 today, passing the bill, and sending it to the House where it will likely face opposition from some lawmakers who regard this as just another tax increase.
In it’s current form, the bill would empower states to require businesses with more than $1 million in out-of-state sales to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the states where the product is either sold to or delivered to.
Under current law, states can only require retailers to collect sales taxes if the merchant has a physical presence in the state. As a result, many online sales are currently tax-free. However, if ratified by the House, many of the more popular online retailers such as Walmart, Target, The Home Depot, CVS, Best Buy, Walgreens, Coach, Sam’s Club, Amazon.com, and Zappos, would be required to withhold local sales tax for the state in which you live.
If you are like me the following are inducements for shopping online:
- Lower Prices
- Free shipping
- Lack of sales tax (in most cases)
- Being able to get what I need or want without having to drive all over the state to find it.
If online retailers are hit with dramatically reduced sales because of this legislation, they may be forced to take away the free shipping inducements. That combined with required sales taxes on the sale, plus the taxes on the shipping and handling costs will create a situation where unless the price is dramatically lower than local retail, consumers like me will seriously re-think all of their online purchases.
The additional administration costs taxation recording, tax payments, and taxation auditing will be passed on the consumers in the form of higher prices, which subsequently means even higher sales taxes.
Currently, it is understood that many of the larger brick and mortar retailers support this legislation is in hopes that it will drive away any competition. While this may be true for some, in my case it’s not…
As an example… a lot of what I purchase online is not carried by brick and mortar retailers, and would be considered a special order item (assuming that the retailer would order for me in the first place). So even if the would order it, it would most likely be at the full MSRP. So in these cases, a brick and mortar retailer isn’t going to get my business anyway, but just makes it more costly for me as a consumer to get what I want or need. So in this case, I not only get taxes, but higher prices as well
Also, for many, the primary concern is that this legislation will open the door to the eventual mandatory minimum sales requirement being passed down to smaller online retailers. If this is done, it could be a job killer for all small Internet retailers, as the incentives to order online will be greatly diminished, if not gone altogether.
Additionally, there is some rumor of a push to revive the once proposed federal national mail order tax, and revising it to include all online retailers regardless of size.
– John