A state sales tax for Internet purchases became a step closer to reality Monday night as the U.S. Senate voted 69 to 27 to approve a bill granting states the power to collect fees for products sold by remote purchases. The bill now goes to the House.
This could affect out-of-state sales for businesses as well as the volume of activity at distribution warehouses throughout the nation. In the Greater Lehigh Valley, for example, there are two Amazon distribution centers and there are retail outlets, such as the popular Cabela’s outdoor outfitter retail store in Hamburg, that benefit from online sales.
The Marketplace Fairness Act addresses out-of-state catalog, telephone and Internet sales, said Stephen E. Schatz of the National Retail Foundation, which has more than 9,000 members – a majority of them small businesses who likely will not be affected by the legislation.
Currently, a retail business is only required to collect state sales taxes for remote purchases if the company has a presence in the state; typically a bricks-and-mortar store.
“This doesn’t increase any tax,” said Schatz, explaining that buyers who live in states with sales tax are already required by law to declare online purchases and pay taxes annually [to the state], but few buyers comply.
“Consumers are still responsible for reporting that,” Schatz said. “Online sellers are in-effect exempt.”
Schatz, who supports the legislation, said it exempts remote and online sellers who do less than $1 million in sales annually.
“If you sell things on eBay or you’re a small business owner, you probably wouldn’t be affected,” he said.
According to Schatz, Monday’s bill is a follow-up to a 21-year-old Supreme Court decision that said Congress can make a law giving states the authority to collect sales taxes for remote purchases.
“[This] only provides states the authority to collect [remote sales tax],” Schatz said. “It shifts the compliance from the buyer to the seller.”
Still, online powerhouses such as eBay and Amazon, as well as legislators from the five states without sales tax – Alaska, Oregon, Montana, New Hampshire and Delaware – reportedly have been fighting unsuccessfully against the bill.
Schatz said he believes the bill stands a good chance of passing the House.
“We are very optimistic,” Schatz said.