The Facts of Online Sales Tax Legislation

Posted on 05/06/2013

This week the Senate will vote on a law that would create a new national framework for states to levy sales taxes on online purchases. It's called the Marketplace Fairness Act and it's creating a lot of controversy. Here are the facts.

What the Marketplace Fairness Act Does
If passed, the Marketplace Fairness Act would give states the opportunity to force online retailers to collect sales tax. You may have noticed that right now when you shop online you don't always pay sales tax unless you happen to be located in the same state where the online retailer is based.

The Impact on Shoppers
You'll no longer get a tax perk for shopping online. You'll have to start paying sales tax in your state-- just like you would if you shopped at a brick and mortar store. This is only for tangible goods so you won't have to pay tax on services or subscriptions.

Supporters of the Bill
The Marketplace Fairness Act is getting support from both brick and mortar retailers and websites. Amazon supports the legislation as do retail giants like Best Buy and Target. Hundreds of businesses of all sizes formed the Marketplace Fairness Coalition to encourage lawmakers to level the playing field and assist states in collecting approximately $23 billion in uncollected state sales and use taxes from Internet and remote sales.

Opponents of the Bill
The biggest, and one of the most vocal, opponents of the bill, has been eBay. CEO John Donahoe told the Wall Street Journal that small online sellers will face crippling costs. He says a small company could face tax audits from multiple states, creating high costs that may force the business to close.

Companies Exempted From the Bill
Right now, any business that brings in less than $1 million a year is exempted from the bill. That means most Etsy and eBay buyers or sellers won't have to worry about paying or charging sales tax.

Contact Your Lawmakers
Time is running out before the Senate votes on the issue. If you feel strongly about the Marketplace Fairness Act make your voice heard by contacting your elected officials.

By Alison Storm

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