A bill with significant local impact across the United States is on track to be passed by the U.S. Senate by the end of this week: the Marketplace Fairness Act, which would mandate that online retailers who sell more than $1,000,000 worth of merchandise in remote (out-of-their-state) sales must handle and charge sales tax on their out-of-state sales.
Currently, online retailers are only responsible for collecting sales taxes in states where they have an established "physical presence." But the Senate voted 70-24 on Tuesday to advance the bill to a vote and close this loophole that puts the technical onus for paying sales taxes on out-of-state online purchases onto customers... who virtually never actually pay them.
What's the local effect? Well, simply: many local businesses feel that essentially duty-free online shopping is killing the Main Street brick-and-mortar business, and that the bill may help to save such mom 'n pop stores. The bill has an impressive list of supporting retail organizations.
However, there are also plenty of groups opposed, calling it a burden on smaller online sellers, an insanely complicated system to navigate, taxation without representation (online realtors headquartered where there is no sales tax would have to collect other states') and an abuse of the Interstate Commerce Clause.
The best simple explanation we could find of the proposed law is on the website Gigaom, who put the appeal thus:
"State governments say they are losing billions on taxes they would have collected if people had gone to the store instead of shopping on the internet. Same for county and city governments who argue that “show-rooming”—where people go to stores just to look before buying online—is killing local communities... Brick-and-mortar stores... say online retailers have an unfair advantage because they can charge lower prices since they don’t collect tax."
And the opposition thus:
"Senators from the few places that don’t have a sales tax say the law will force businesses in their states to set up an expensive tax-collection system... Anti-tax crusaders... oppose on the grounds the law will lead to bigger government... eBay said the law will hurt millions of people who have home-based businesses... Tech lobbyists... worry about the effect on e-commerce."
Amazingly in this era of hyper-partisanship, both the bill's support and opposition are thoroughly bi-partisan. The sponsor is Senate Republican Mike Enzi of Wyoming, and Illinois Democrat Dick Durbin is a big proponent; the opposition is led by Oregon Democrat Ron Wyden and New Hampshire Republican Kelly Ayotte.
For some more opinions: USA Today likes it; the Wall Street Journal doesn't.
We reached out to our Facebook followers and asked for their thoughts; here's what they had to say:
Ed Crean: "It is not about fairness, and it will have no impact in that respect. It is about revenue, as is every government 'fairness' sales pitch." — Woodridge Patch Facebook
Christopher Lindsey: "It will encourage online vendors to create a physical presence in the state (like Amazon is doing) and create even more competition for brick-and-mortar stores." — Glen Ellyn Patch Facebook
Karen Sherman Bushy: "I own a small business right here in Downers Grove. I collect sales tax for DG, for DuPage County and the State of Illinois. I also pay property taxes to all of those same entities, including your schools. My biggest competitors are on line, and they do not have to collect sales taxes if you buy from them. Have you tried to get any internet seller to help support the Scouts, Little League, the teams at Downers North/South, the food pantry at the church in Downers, etc., etc.? I'll bet not! If the small businesses can't compete, they will be gone... So, now that there would be less sales tax collected and less property taxes (remember, vacant stores are not valuable real estate!) who will pick up the difference? You, my friendly neighbor!" — Downers Grove Patch Facebook
Jan Gombos Woods:"My question is why should the sales tax go to the state of the purchaser and not the seller, as is the case when you walk into a business to buy something? ... I used to sell Tupperware and we had to collect sales tax for the county we lived in... not the county/state the person lived in. I personally think we are taxed too much already—there are taxes on everything you buy and on your paycheck, yet the roads in Illinois that need help and work done on them are continually ignored, yet our expressways that DON'T need work continually get it year after year after year! ... Tax reform and a serious audit of the state by someone outside it is needed." — Downers Grove Patch Facebook
Carol Sue Garner: I'm thinking of moving to Oregon so I don't have to deal with this. Or Delaware, Montana, or Alaska. I'm not sure most people shop on the internet because of the sales tax issue because who wants to pay shipping and wait? Mostly it's about inventory and in-store service. At least for me. Most of the retailers went online to deal with supply-chain issues, again, from what I've read. — Naperville Patch Facebook
So what do you think? Tell us in the comments.
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