Are You Ready for a Federal Online Shopping Tax?

Willie Sutton famously said he robbed banks "because that's where the money is." In a similar vein, cash-strapped state and federal lawmakers are looking to raise funds wherever they can, which invariably leads them to online shopping, one of the fastest growing industries in an otherwise tepid economy.

But now, New York and several other states are looking to get their cut of the e-commerce pie by collecting sales tax on all internet purchases and transactions.

Amazon, like my co-host Jeff Macke, thinks this is not such a great idea. As a result, the Seattle company run by billionaire Jeff Bezos has hired a powerful lawyer to make its case court.

But like most issues, especially those emanating from Washington or the capitals of large states, the matter is complicated.

According to the latest Commerce Department data, internet sales increased by 18.4% in the second quarter, while traditional retail sales rose by just 4.7%. Even so, on-line shopping still accounts for only about 5% of total retail sales, or $65 billion out of $1.12 trillion. Read more >>

Senate bill jeopardizes tax-free online shopping

States could force Internet retailers to collect sales taxes under a bill that overwhelmingly passed a test vote in the Senate Monday.

Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are essentially tax-free, giving Internet retailers a big advantage over brick-and-mortar stores.

The bill would allow states to require online retailers to collect state and local sales taxes for purchases made over the Internet. The sales taxes would be sent to the states where shoppers live.

The Senate voted 74 to 20 to begin debating the bill. If that level of support continues, the Senate could pass the bill as early as this week.

Supporters say the bill is about fairness for businesses and lost revenue for states. Opponents say it would impose complicated regulations on retailers and doesn't have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt. Read more >>

Online sales tax to be added to defense authorization bill

This may be the last Christmas of online shopping without paying sales tax. A proposed online sales tax has been offered as an amendment to the National Defense Authorization Act, much to the ire of opponents.

The Computer and Communications Industry Association, a group that opposes this move, says that an online sales tax will burden small businesses, “some of the most promising candidates for future economic growth.”

“This proposal, and other online sales tax collection proposals like it, would allow states to penalize the innovative e-commerce business model by targeting small online businesses as convenient sources (and collectors) of revenue,” said CCIA President and CEO Ed Black.

The Marketplace Fairness Act, and its House counterpart the Marketplace Equity Act, seek to clarify, and arguably overturn, a 1992 Supreme Court ruling that requires retailers to have a physical presence in a state in order to collect sales tax on goods. Read more >>