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Internet Sales Tax Closer to Signing

by Fox Van Allen on May 07, 2013

AmazonThe United States Senate approved the Marketplace Fairness Act of 2013 by a bipartisan 69 to 27 vote, advancing the controversial Internet sales tax proposal to the House of Representatives.

Should the bill become law, all purchases you make online at places such as Amazon and eBay would be subject to the same sales tax rate you’d pay buying from a local store. New York City residents, for example, would have to pay their standard 8.875% sales tax on all Internet purchases, which includes a state tax, city tax, and transportation district tax. Online retailers would pay this tax directly to your state, who would then be responsible for making sure that each portion of the tax gets to the right people. Those living in states that don’t have a sales tax, such as Oregon and New Hampshire, will not see any change.

Currently, many states require taxes to be paid on online purchases even if the retailer charges none, though this is rarely followed. This is called a “use tax,” and it is equal to the applicable local sales tax rate.

Ultimately, the Marketplace Fairness Act’s success will depend upon whether House Republicans view it as a new tax, or simply as a better way to collect an existing one.

“Obviously there's a lot of consumers out there that have been accustomed to not having to pay any taxes, believing that they don't have to pay any taxes,” explained Rep. Steve Womack (R-AR), the bill’s House sponsor. “I think a lot of our members understand that. There's a lot of political difficulty getting through the fog of it looking like a tax increase.”

Should the bill pass the House of Representatives, President Obama has indicated he will sign the bill into law. States may be able to collect taxes on Internet sales as soon as 90 days after the bill is signed. It is estimated that the Marketplace Fairness Act could raise an estimated $12 billion for state treasuries across the country.


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