Senate approves Internet sales tax proposal

(AccountingToday) The Senate has approved legislation requiring online retailers to collect sales taxes from Internet sales, even if they don’t have a physical presence in the state where the customer resides.

The Marketplace Fairness Act has attracted wide support from brick-and-mortar retailers who have seen shoppers coming to their stores to check out merchandise, only to order it online, sometimes while still in the store from their smartphones. Many revenue-starved state governments have also supported the bill. The legislation even garnered the support of e-commerce giant Amazon.com, which has traditionally fought against online sales taxation, but has been expanding its warehouse presence across the country.

Smaller Web retailers have opposed the legislation, however, arguing that it would be too difficult to calculate and collect sales taxes from every state and locality that requires them. They have been supported by eBay, which argued that the exemption level of $1 million in sales for small e-tailers is too low. The bill is also expected to face opposition from many lawmakers in the House, where the prospects for its passage are uncertain. The Senate had approved the bill in nonbinding votes in recent months and was widely expected to eventually pass the legislation.

The bill authorizes each member state under the Streamlined Sales and Use Tax Agreement, the multistate agreement for the administration and collection of sales and use taxes adopted on Nov. 12, 2002, to require all sellers not qualifying for a small-seller exception (which is applicable to sellers with annual gross receipts in total U.S. remote sales not exceeding $1 million) to collect and remit sales and use taxes with respect to remote sales under provisions of the agreement, but only if the agreement includes minimum simplification requirements relating to the administration of the tax, audits, and streamlined filing.

The bill now heads to the House. The effort received a boost last week when former Vice Presidential candidate and House Budget Chairman Paul Ryan, R-Wis., spoke in favor of the concept of ending special tax treatment for online-only retailers.

If you have any questions about how this bill may affect your business, e-mail Greg Gandy or Mike McDevitt.