US Senate Approves Internet Sales Tax Proposal with Strong Opposition from Conservatives

The United States Senate voted 69 to 27 to pass the Marketplace Fairness Act, a bill that will put an end to tax-free online shopping. This bill allows 45 states and the District of Columbia to require retailers online to collect tax on online purchases made. The bill applies only to online retailers with $1 million in sales in states where they have no physical store outlets or warehouses. This Senate bill on Internet sales tax will overturn a court decision that was laid down in 1992.

This bill had bipartisan support at the Senate. President Barack Obama has expressed full support of the bill. However, there is no certainty yet whether or not the House will pass it as well since Republicans are currently not unanimous on the issue. But if the bill gets approved in the House of Representatives, it would most likely be signed into law given the support that is has garnered from the White House.

A split House

A number of Republicans in the House have expressed their full support. They argued that this bill would provide equal opportunity for brick-and-mortar retailers. The Republicans who support it also clarified that the bill does not necessarily create a new tax and instead would enforce collection of taxes that traditional retailers are already charged with.

On the other hand, those who oppose the bill argued that it is in effect an imposition on consumers and is actually a tax increase. They add that the tax would add to the burden of Internet businesses in their respective states. Once enacted, an estimated additional $12 billion in sales tax will be collected every year from online purchases alone.

Tax-free purchases

Wal-Mart is already charging sales tax on web purchases. But retailers that only sell online such as Amazon and Overstock do not charge sales tax for purchases, and residents of many states are shopping tax-free. There is a law that requires sellers to collect tax from consumers in states where they have physical outlets. Amazon is already collecting taxes for nine states where they keep warehouses, and the Internet giant has expressed its support on the bill.

For most other states, shoppers only pay a “use tax” when they buy something online without sales tax. But not many people follow through with this.

What consumers are thinking

AlixPartners, an advisory firm conducted a survey of 2,500 online shoppers and found out that 30% of people shopping online said that they would patronize more brick-and-mortar retailers if the sales tax is imposed. Almost 50% said that the sales tax being in effect would not in any way influence their online purchases.

But not all online retailers are looking forward on the prospect of determining tax rates at varying localities. Those who are opposed said that the task ahead of them would be too tedious and that the sales would create an administrative nightmare and could potentially hurt business. The group Americans for Tax Reform is an anti-tax organization that is very much opposed to the bill, and they call it nothing more than a tax increase.