Time for everyone to 'fess up. Who has ordered goods via the Internet and not paid your state sales tax? As suspected, most everyone is raising their hand.
Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. While most states do require individuals to report their online purchases when they file their annual tax returns not everyone does.
Shopping online and avoiding sales taxes has indeed saved consumers a lot of money. But it has also created an uneven playing field for brick and mortar retailers versus Internet-based retailers.
On the heels of President Barack Obama once again setting a priority target of an overhaul of the complex U.S. tax code in his State of the Union speech, Senator Richard Durbin said he will offer a bill that could resolve the long-unsettled issue of online sales taxes.
The Marketplace Fairness Act will be introduced by Durbin, an Illinois Democrat, and two Republican counterparts, Senators Mike Enzi of Wyoming and Lamar Alexander of Tennessee. It would give states the option to collect sales tax owed to them by out of state businesses.
States aren't allowed to collect sales tax from out of state retailers right now, so if this change passes, states that are hunting for revenues will have another way to bring in more cash.
Congress tried to pass similar bills in 2011 but they failed to gain enough support from both parties. This bill is a bi-partisan effort so there may be more momentum and support.
If you want to read more about the proposed Act from the supporters point of view visit http://www.marketplacefairness.org/ or http://en.wikipedia.org/wiki/Marketplace_Fairness_Act.
Time will tell how far this action makes it in the politically-charged tax process, but support is indeed growing. If you are a retailer which sells outside your state boundries online you may find that you'll need to implement significant new accounting and tax reporting procedures and systems. And if you're a consumer those days of avoiding sales tax for online purchases may be waining.
We are monitoring the situation closely for our retail clients and are ready to help you with any compliance issues which may arise.
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