Online Sales Tax Bill to Be Voted on In Congress

04/20/2009

Consumers have been doing more online shopping lately, partly due to the fact that few sites require sales tax. This may be coming to an end however as a bill is due to be voted upon in Congress that will force companies such as eBay and Amazon.com to collect sales tax on the products sold on their sites. Attempts to close this loophole have been in motion during the past 10 years; in fact, since 2003 similar legislation has been introduced in every Congress, but none have passed either chamber.

This year may finally be the one where this legislation is passed primarily due to the need most state governments have for funds. Neil Osten, policy analyst with the National Conference of State Legislatures, lends his full support to the bill stating that this will be a fiscal relief policy for states that will not require any federal government funds. He uses for reference an important study by the Rockefeller Institute that concluded that state sales tax collections in 2008 were the lowest they have been in the past 50 years. According to him, supporters of the bill have already agreed on it and sent it to sponsors for approval.

Many states claim that the reduced sales tax they are receiving is now threatening their local and statewide budgets, which includes schools, fire, police, and garbage collection. Another concern is that brick and mortar companies may be pushed out of business as they do not receive the same sales tax advantage that online stores do. Most people who engage in online shopping are getting away with not paying their sales tax, but this doesn’t mean that they are not required by law to pay it. It also has much to do with Internet stores not wanting the hassle of calculating and keeping track of this information when there are 7,900 separate taxing jurisdictions.

The Streamlined Sales Tax (SST) initiative, passed in 2002, standardizes the sales tax rules across the board, such as the definition of food. It is up to each state to decide how much sales tax to charge on food, but the definition of what constitutes food remains the same for each state. This was approved in order to reduce the burden that individual states carry when it comes to complying with sales tax rules and regulations. Up until now, online shopping retailers have only had to collect and remit sales tax on sales in states in which they have a physical location.

Under these current conditions, sales taxes are seldom collected. Shoppers often get away with not paying sales tax on items they purchase when shopping online. The law currently states that consumers who owe sales tax are to keep their receipts and pay their sales tax to their home state when they file their returns, but most people do not even realize they are supposed to do this. If Congress passes the bill, it will land on the President’s desk.

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