A bill recently proposed by Democrats in Congress would require online businesses to impose federal taxes on all online purchases.
Currently, e-commerce storefronts are required to follow state laws and consumers are tasked with reporting online purchases for tax purposes.
It works like this: if the online business has a physical presence within the United States, it is required to charge a sales tax. If it does not have a physical presence, consumers are required to pay a "use tax," which is rarely remitted.
The proposed Main Street Fairness Act, supported by online giants Amazon, Sears, and others organizations, would require e-commerce storefronts to collect taxes with each online purchase, ending what many have called and unfair advantage for online-only businesses.
Amazon supports the bill despite profiting from the current lack of sales tax amongst the majority of Amazon sellers. Amazon reps added that the company currently charges taxes on more than half of its business worldwide.
Although those opposed to the bill claim it would put small businesses at a disadvantage, Senator Dick Durbin (D-Illinois), says small businesses would be exempt from collecting online taxes in the proposed plan.
One of the major companies opposed to the bill is Ebay, along with the Electronics Retailing Association, the Computer and Communications Industry Association, TechNet, and the National Taxpayers Union.
"Consumers shouldn't have to face the burden of reporting all of their online purchases," Durbin said in a statement. Main Street retailers collect sales taxes on behalf of consumers, why shouldn't online retailers do the same?
"In 2012, states across the country, including Illinois, are expected to lose as much as $24 billion in uncollected state and local taxes on internet and catalogue sales. From 2005 to 2010 the state of Illinois estimated it lost $153 million each year. The Main Street Fairness Act doesn't ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed."
Amazon has been one of the biggest proponents in favor of the sales tax, lobbying for the sales tax in New York back in 2008 and 2011.
Ebay, on the other hand, believes that if the tax is imposed on each individual seller, the results will be devastating.
"A collection of state tax commissioners have again been able to get an outdated Internet sales tax bill introduced in Congress, but we are confident that it will be rejected because it would harm small Internet retailers," wrote Brian Bieron, senior director, of federal government relations and global public policy at eBay.
"Better policy is reflected by H.Res. 95 from Congressman Dan Lungren (R-CA) and Congresswoman Zoe Lofgren (D-CA) with 27 bipartisan co-sponsors, which says that Congress won't give states 'the authority to impose unfair tax collecting requirements on small online businesses.
"The giant retailers jockeying for new Internet sales taxes have national store networks that they combine with their major online sales platforms, a business model they know brings some tax collection duties. Forcing small businesses to take on the same costs and tax burdens as national retail businesses is unrealistic, unfair and will unbalance the playing field between giant retailers and small business retailers on the Internet."
(Via PC Mag)