Multi-state – Should the Senate Have Passed an Online Sales Tax? – March 28, 2013

“The Senate, for the first time in four years, has officially passed a budget resolution. After several hours of voting on amendments – in a process known as “vote-a-rama” – the budget offered by Sen. Patty Murray, D-Wash., squeaked through the upper chamber last week on a vote of 50 to 49.

One of the amendments attached to the budget was a bill known as the “Marketplace Fairness Act.” That bill, one of the few these days with bipartisan co-sponsors, would allow states to force online retailers to collect sales tax even in places where the retailer does not have a physical presence.

This may sound like an obscure issue, but it has serious implications for tax policy and the way in which Americans shop. Currently, online retailers like (which supports an online sales tax) and eBay (which does not) don’t have to collect sales tax in those states in which they don’t have any actual property. This allows them to undercut brick-and-mortar shops that are required to collect sales tax on every purchase.

The exemption also affects state budgets; the National Conference of State Legislatures estimated that loss of sales tax revenue to online retail cost a collective $23.3 billion last year. “This gives states and state legislatures the right to collect sales and use taxes from all the people who owe it, rather than just some,” said Sen. Lamar Alexander, R-Tenn., a key proponent of the bill. But an online sales tax still has some powerful opponents, including Senate Finance Committee Chairman Max Baucus, D-Mont., who argue that it will hurt small businesses. And its inclusion in a non-binding budget resolution passed by one chamber of Congress leaves it far short of becoming a law.

So should the Senate have moved on an online sales tax? …”

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