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The Internet Sales Tax Exemption About To Expire?

U.S. states could collect millions of dollars in online sales taxes, with members of both parties in Congress sponsoring legislation that would resolve states' decades-long struggle to tax businesses beyond their borders.

A bipartisan group of 53 lawmakers in the Senate and House backed the Marketplace Fairness Act of 2013 last Thursday, Febuary 15, 2013, which aims to resolve the differences between bills introduced in the Senate and House in the last Congress. 

The proposed legislation permits States to enforce the Collection of Sales & Use Taxes from Internet Retailers, placing them on a par with brick and mortar businesses.  


This Act permits States to require qualifying Sellers to collect and remit sales and use taxes on remote sales, but the States must implement certain simplification requirements.  

The bills introduced in the House and Senate are substantially similar in all material respects. Each provides an important exception, the "Small Seller Exception", for businesses with less than $1 million dollars in annual domestic remote sales. 

Since 1992 when the Quill case was decided by the Supreme Court, States have been prohibited from collecting sales taxes on purchases made by in-state customers from out-of-state sellers who lack sufficient physical presence. Simplification is required because the Supreme Court ruling cited a concern that collecting sales tax for multiple states would be too difficult. 

The Marketplace Fairness Act requires that states must simplify their sales tax lawsin order to ease those concerns and make multistate sales tax collection easy.  

In the last decade, Internet sales have gone from 1.6 percent of all U.S. retail sales to more than 5 percent, according to Commerce Department data, a proportion that will likely grow as shoppers turn more to handheld devices to make purchases. In the third quarter of 2012, retail "e-commerce" sales were $57 billion, the department said. 

Large Internet retailers are worried the tax could drive up the cost of doing business. They would also have to create new systems and software to collect the surcharges, adding to their costs.

Amazon said in July it prefers having the tax issue resolved at the federal level. States and cities say they can recoup billions of dollars with the tax. Some estimate around $11 billion in tax revenues are currently being lost, due to exempt internet sales.

In the last decade, Internet sales have gone from 1.6 percent of all U.S. retail sales to more than 5 percent, according to Commerce Department data, a proportion that will likely grow as shoppers turn more to handheld devices to make purchases. In the third quarter of 2012, retail "e-commerce" sales were $57 billion, the department said.

Large Internet retailers are worried the tax could drive up the cost of doing business. They would also have to create new systems and software to collect the surcharges, adding to their costs. Amazon said in July it prefers having the tax issue resolved at the federal level.

States and local jurisdictions will clearly benefit from significantly increased tax revenue, but internet purchasers will find their bargain purchases much reduced in value and businesses will find their compliance costs increased.

 

Have State & Local Tax Issues? 

Contact the Tax Lawyers at Marini& Associates, P.A.

 

for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms

Sources:

 

Read more at: Tax Times blog

 
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