TAXATION WITH MITIGATION? | SALES TAX MAY HIT THE WEB SOON
For the past 10 years, e-commerce has been looked at as the “Wild West” of the marketplace. This has never been more the case than with sales tax. So far retailers aren’t required to collect taxes on out-of-state transactions. It has more or less been up to the consumer to calculate their taxes and send them in on their own. This ambiguity is about to reach its turning point.
A bill has been introduced to the Senate known as the “Marketplace Fairness Act”. Four senators, Mike Enzi (R-Wyoming), Dick Durbin (D-Illinois), Lamar Alexander (R-Tennessee) and Tim Johnson (D-South Dakota), all support this new act which, if passed, will require all retailers to collect sales tax on out-of-state transactions instead of relying on the consumer to report their own purchase. This bill excludes any businesses that make less than $500,000 in total out-of-state sales in a year.
If the bill were to pass, there would be two ways the states would be able to collect sales tax: They could become member states of the Streamlined Sales and Use Tax Agreement (SSUTA) and would then require out-of-state sellers to collect and send sales and use taxes after 90 days.
For other states that do not wish to join the SSUTA, they can collect taxes by adopting certain minimum simplification requirements. It also would provide sellers with additional notices on collection requirements.
So what does all this mean for the consumer?
What used to be a blissful, tax free buy would be increased to adhere to tax laws, which means consumers will be forced to pay more for their products. This will also mean that the consumer won’t have to pay for your state use taxes at the end of the year. This would mean there is no net increase.
Some major e-commerce sites, like Amazon.com, consider this to be a win-win. The states are required to simplify their sales tax rules to adopt the new rules; this will reduce the problems most businesses in-state and out-of-state have with taxation. Others, like eBay, have reportedly expressed displeasure with it arguing that small businesses would not be sufficiently protected.
Most believe this will open up more of an “even playing field” for brick-and-mortar mom and pop stores who have to charge 5-10% extra. Although this bill has yet to be passed, it shows us just where eCommerce is headed in the near future and will perhaps clear up any uncertainty that is going on in the “Wild West”.