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Is It Time for Online Sales Tax?

  • Feb 10, 2014 | Gail Cole

 Something might happen after all. Maybe.

Millions of brick-and-mortar retailers want their online counterparts to collect sales tax. Many online and other remote retailers argue that to do so would be burdensome and could potentially put them out of business. Main Street retailers retort that they’re in danger of going out of business themselves, because customers shop online where they can buy the same item without sales tax. Remote retailers say they don’t have nexus—the (historically physical) connection between a state and a retailer that triggers a sales tax collection obligation—so there is no reason for them to collect the tax. And so on.

A dicey issue, indeed, and one that politicians are loathe to tackle. The United States Supreme Court passed on an opportunity to settle the issue last fall, when it declined to hear two cases challenging a New York State law requiring certain online businesses to collect sales tax because of their in-state, affiliate sellers.

The U.S. Senate did vote in favor of the Marketplace Fairness Act of 2013 (MFA) last May. MFA would impose a sales tax obligation on sellers doing a certain amount of business in a state, provided that state simplified its sales tax laws and regulations. A compromise, as it were. For a time, it looked like a remote sales tax would happen.

Yet it didn’t. MFA sat untouched in Congress until last September, when House Judiciary Committee Chair Bob Goodlatte (R-VA) released 7 principles to guide the discussion of online sales tax. Said discussion, if it has occurred, has taken place behind closed doors.

Still, those in favor of remote sales tax aren't giving up. There has been a renewed push for online sales tax this year. Hundreds of organizations--which together speak for millions of Americans--issued a joint letter to Chairman Goodlatte, urging Congress “to make the 2013 holiday shopping season the last where Main Street businesses must compete at a government-created price disadvantage” (Yahoo News).

No response to the letter has officially been given. However, there are rumors that work on online sales tax legislation is afoot. A House Judiciary aid has said that the chairman “welcomes the input from all members of Congress, taxpayers, industry and trade groups, and representatives of state and local governments in finding a solution to address the issue of Internet sales tax.”

Do you sell into multiple states? How do you handle sales tax?

photo credit: alles-schlumpf via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.