New Bill Would Require Online Retailers to Charge Sales Tax to All Customers

| by
article imagearticle image

A new law that is likely to pass in Congress on Monday will make it so all retailers have to charge their customers tax, even those who live in a different state.

Many sites like Amazon and eBay have private sellers who only charge tax to those who live in the same state as them. Under a law, states can only require stores to collect sales tax if the store has a physical presence in the state. That means many online retailers do not charge the majority of their customers a tax fee. 

This new law will make it easier for states to collect sales taxes on online purchases. Most larger retailers are happy about the news, but for small-business owners, the law is worrisome.

"It's a huge burden for a company like ours," Sarah Davis said, co-owner of "We don't have an accounting department, we've got my father-in-law."

In 1999, Davis started the company. Now, she runs it with her brother-in-law. It is a small business but makes $10 million a year in sales, mostly online. 

The company sells lightly used designer handbags and purses from its website and on eBay. They also have three stores, in Beverly Hills, San Diego and San Francisco. 

While the law says companies like Fashionphile don't have to charge sales tax to out-of-state customers, it does require those customers to pay the taxes when they file state tax returns. 

They're called "use taxes" on state income tax returns. They apply to purchases made over the Internet, from catalogs, television and radio ads. 

Officials admit that very few people pay these taxes.

"I do know about three people that comply with that," Sen. Mike Enzi, R-Wyo. said. He is the main sponsor of the bill.

The bill empowers states to require businesses to collect taxes for products they sell online, in catalogs and through radio and TV ads. The state the shopper lives in would be sent the sales tax.

Businesses that make less than $1 million a year in out-of-state sales would be exempt.

In total, states lost about $23 billion last year because they could not collect sales taxes on out-of-state purchases. Around $11.4 billion of that was lost from Internet sales, the rest came from catalogs, mail orders and telephone orders.

"This is a sales and use tax which is on the books," Michael Kervcheval, CEO of the International Council of Shopping Centers said. "This isn't a tax issue. It's a tax collection issue."

Though the goal of the bill is to help the states, some believe it is limiting the freedom of the Internet. 

Many young people are protesting the bill on Facebook, bombarding Enzi's page with messages asking him to not go forward with it. 

Generation Opportunity, a nonprofit in Washington D.C., is one of the main opponents of the bill. The group represents people ages 15 to 30. 

"We don't want federal or state governments taxing the Internet," Evan Feinberg, president of Generation Opportunity, said. "If the young people's voices are heard, it will tip the scales in favor of freedom."

Sources: Daily Mail, Trib