Internet Sales Tax... Approve or Not?

[BridgeTroll]

http://news.cnet.com/8301-1023_3-57583140-93/senate-passes-internet-sales-tax-bill-by-2-to-1-margin/

Senate passes Internet sales tax bill by 2-to-1 margin

Marketplace Fairness Act, which would allow states to levy taxes on Internet purchases, now moves on to the House of Representatives for consideration.

The U.S. Senate on Monday approved a controversial bill by more than a 2-to-1 margin that would allow states to levy taxes on Internet purchases.

The Marketplace Fairness Act, which would allow states to require online vendors to collect sales and use tax on certain out-of-state purchases, was approved in a bipartisan vote of 69 to 27. The bill, which already has the support of President Obama, will now move on to the House of Representatives.

If approved, the bill would overturn a 1992 Supreme Court ruling that found out-of-state retailers generally don't have to collect taxes unless they have a sufficient business presence. The bill, officially known as S.743, does include an exception for businesses that make under $1 million a year in revenue.

Backers of the bill, including Walmart, Macy's, and Best Buy, argue that online retailers often do not collect sales taxes at checkout and thus enjoy an unfair competitive advantage over the big-box stores. The Marketplace Fairness Coalition, a group of companies supporting the legislation, says the act would "level the playing field."

Opponents say the bill amounts to a multibillion-dollar tax hike on American consumers. The National Taxpayers Union set up a petition to Congress in March that said the tax was "really just a way to unleash state tax collectors on the Internet," and 15 conservative groups also sent a letter to members of Congress saying an Internet tax law is is "bad news for conservative principles and the cause of limited government."

A fierce battle over the legislation broke out among Internet retailers in the weeks leading up to the vote. eBay CEO John Donahoe, who argued that the proposed tax places an unreasonable burden on small retailers, sent users of the online auction site an e-mail last month urging them to contact their representatives to express opposition for the bill. In his e-mail, Donahoe singled out rival Amazon, which supports the legislation.

"This legislation treats you and big multibillion-dollar online retailers -- such as Amazon -- exactly the same," Donahoe wrote in the e-mail. "Those fighting for this change refuse to acknowledge that the burden on businesses like yours is far greater than for a big national retailer."

[strider]

In the FWIW department, internet purchases are subject to shipping and handling and that is often higher than the sales tax one would pay if bought locally.  Basically, to be competitive with the internet companies, local companies just have to be priced fairly, have the item in stock and provide a positive shopping experience. I avoid big stores like Walmart because of poor quality, long lines and bad shopping experiences.  I shop the internet because it saves me time, offers a better selection and goods are often of a higher quality to price benefit than available locally. Paying sales tax in addition to shipping and handling may tip the scales in favor of a local purchase in rare instances, but I doubt my shopping habits will change much.  In fact, I try to at least buy major things local in Florida so pay that sales tax anyway.  Several states have agreements with Florida as it is and charge sales tax now.  Overall, this law does not seem like it will have much effect either way. 

[JeffreyS]

Not sure where I stand yet. Perhaps the tax if passed should apply to all foreign sales not just high volume sellers.

[tufsu1]

approve...sales tax is sales tax...regardless of how I am purchasing

[BridgeTroll]

I voted yes in the interest of fairness... if brick and mortar shops must charge sales tax then internet sellers should have to also...

[Tacachale]

I approve because it's not a new tax, it's just closing a tax loophole that advantages online sellers over local ones. Online retail would just be bound by the same taxes that brick-and-mortar stores are already having to pay. Additionally, something I didn't realize until recently, was that you're still supposed to pay sales tax on online purchases, but the burden is on you rather than the retailer. Very few people know about this (I sure didn't) so they don't pay, closing this loophole would sort this out.

As I understand it there will be an exemption for companies making less that $1 million a year. I'm sympathetic to the smaller retailers who would be affected by the change, but the fact remains that both small and large brick-and-mortar stores are already being disadvantaged in the current setup, as their products look more expensive because they have to charge for tax. Obviously there are advantages to online retail that brick-and-mortar stores don't have, they don't need the extra help.

[simms3]

^^^All true.  Even with the sales tax, bricks and mortar will find it hard to compete with online sales yet still.  The overhead alone for a bricks and mortar operation is simply much higher than an online distribution operation, and like Tacachale said, this is simply the closure of a tax loophole where we were all supposed to declare at one point all of our online purchases and pay taxes on them (there was never any setup as to how states were actually going to collect the taxes).

This is also a jobs bill and simply levels the playing field.  A distribution retailer who sells only online might employ 1,000 people and have 1-2 large warehouses they ship from.  A bricks and mortar retailer who sells the same volume of goods will employ many times that and feed local economies (jobs, property taxes, etc).

I don't agree with "making it harder" for online retailers to compete, but this isn't that.  This is "making it less hard for bricks and mortar to compete" by introducing some degree of fairness.  It's such a logical bill in my mind, which is an utter rarity nowadays.

And PS: this is a sales tax - what's different about this and the Fair Tax, LoL?  All governments are strapped - this isn't taxing income, Tea Party people should be ALL OVER this, but they're so ironic, because Obama signed endorsed the bill all of a sudden this is a controversial "tax".  I hate hypocrites.

[Tacachale]

^You're totally right. I'd oppose this if it was a bill for new taxes on internet sales, but it's just closing a loophole.

Put another way, the current setup acts as an incentive for companies like Amazon and Ebay to keep their physical presence out of states with sales tax, and hold onto their extra 7% back in Seattle and Silicon Valley. This way, I expect they'll start branching out their operations, which may actually improve their service. I really think that's what Amazon is thinking about in supporting the bill.

[NotNow]

^^^All true.  Even with the sales tax, bricks and mortar will find it hard to compete with online sales yet still.  The overhead alone for a bricks and mortar operation is simply much higher than an online distribution operation, and like Tacachale said, this is simply the closure of a tax loophole where we were all supposed to declare at one point all of our online purchases and pay taxes on them (there was never any setup as to how states were actually going to collect the taxes).

This is also a jobs bill and simply levels the playing field.  A distribution retailer who sells only online might employ 1,000 people and have 1-2 large warehouses they ship from.  A bricks and mortar retailer who sells the same volume of goods will employ many times that and feed local economies (jobs, property taxes, etc).

I don't agree with "making it harder" for online retailers to compete, but this isn't that.  This is "making it less hard for bricks and mortar to compete" by introducing some degree of fairness.  It's such a logical bill in my mind, which is an utter rarity nowadays.

And PS: this is a sales tax - what's different about this and the Fair Tax, LoL?  All governments are strapped - this isn't taxing income, Tea Party people should be ALL OVER this, but they're so ironic, because Obama signed endorsed the bill all of a sudden this is a controversial "tax".  I hate hypocrites.

simms,

The fair tax is a replacement for federal income taxes.  It requires the repeal of the 16th Amendment.  The fair tax has nothing to do with state and local sales taxes.  The argument against this bill is the fact that it grants state governments the power to audit out-of-state businesses, impose liens on their property and, ultimately, sue them in state court.  There is also disagreement about the arbitrary figure of $1m in out of state sales before the tax kicks in.  Some want $0, some want $10m. 

Google is your friend.

[FSBA]

And PS: this is a sales tax - what's different about this and the Fair Tax, LoL?  All governments are strapped - this isn't taxing income, Tea Party people should be ALL OVER this, but they're so ironic, because Obama signed endorsed the bill all of a sudden this is a controversial "tax".  I hate hypocrites.

I'm not a big Fair Tax guy but at least with that you keep your entire paycheck in exchange for the extra sales taxes. Does this bill mean I keep the 3% of my check that started being taken out again this year?

[fsquid]

they’ve voted to make it nearly impossible for small mom & pop businesses to conduct online transactions while large businesses, like Walmart and Target will have the run of the place because they already have the state structure in place.

[bill]

they’ve voted to make it nearly impossible for small mom & pop businesses to conduct online transactions while large businesses, like Walmart and Target will have the run of the place because they already have the state structure in place.

Oh we are going to do something out of "fairness" and it crushes small business? Well that has never happened before. 

[Tacachale]

they’ve voted to make it nearly impossible for small mom & pop businesses to conduct online transactions while large businesses, like Walmart and Target will have the run of the place because they already have the state structure in place.

Yes, "mom and pop" online retailers will have a harder time with it compared to the big boys, but we're already harming mom & pop businesses that currently pay taxes by making them compete with businesses in other states that sell items cheaper by exploiting this tax loophole.

[avonjax]

^^^All true.  Even with the sales tax, bricks and mortar will find it hard to compete with online sales yet still.  The overhead alone for a bricks and mortar operation is simply much higher than an online distribution operation, and like Tacachale said, this is simply the closure of a tax loophole where we were all supposed to declare at one point all of our online purchases and pay taxes on them (there was never any setup as to how states were actually going to collect the taxes).

This is also a jobs bill and simply levels the playing field.  A distribution retailer who sells only online might employ 1,000 people and have 1-2 large warehouses they ship from.  A bricks and mortar retailer who sells the same volume of goods will employ many times that and feed local economies (jobs, property taxes, etc).

I don't agree with "making it harder" for online retailers to compete, but this isn't that.  This is "making it less hard for bricks and mortar to compete" by introducing some degree of fairness.  It's such a logical bill in my mind, which is an utter rarity nowadays.

And PS: this is a sales tax - what's different about this and the Fair Tax, LoL?  All governments are strapped - this isn't taxing income, Tea Party people should be ALL OVER this, but they're so ironic, because Obama signed endorsed the bill all of a sudden this is a controversial "tax".  I hate hypocrites.

I didn't want to comment until I read a post that covered my view and your's is exactly my view. I work for a large retailer who get's throttled by online companies and many comments I hear from customers as to why they are going to pay the SAME EXACT PRICE for a product we carry is because they can save the sales tax. There is no universe that that would be considered a fair playing field.
And the Tea Party and others are already calling it a tax increase.
ARE YOU KIDDING ME?
It's the right thing to do and it's the right thing to do to exempt the 1 million and less online retailer.

[RiversideLoki]

There's so much cognitive dissonance in this thread from our normal bunch of anti-tax folks that the founding fathers are spinning in their graves wrapped in "don't tread on me" flags.