U.S. Senate to Vote on Internet Tax

05.02.2013
Issues & Policies

The U.S. Senate is poised to approve a nationwide system for collecting Internet sales taxes.  

Under the Marketplace Fairness Act, Internet retailers that have more than than $1 million in revenues and located in states opting in to the new system would have to collect sales tax for online transactions and return revenues to the states.

In other words, a Connecticut business that sells products online to customers, say, in Oregon, Indiana, New Mexico, Maine, and California, will have to figure in to the price of each transaction the different sales taxes in those localities.

States have been seeking the help of Congress to capture what is estimated to be about $11 billion in “lost” sales tax revenue for online transactions.

Proponents say the bill will help brick-and-mortar stores compete with online retailers who don’t have to charge a sales tax. Online shoppers are required to self-disclose those transactions on their state tax returns, but few taxpayers actually do.

Others say, however, that the bill will increase administrative costs for small businesses trying to comply with the law. Under the act, the state will provide businesses with the software to calculate the transactions—which itself could be a daunting task with an estimated 9,600 different state and local taxing jurisdictions in the U.S.

Another aspect that some skeptics raise is the possibility that the bill could open the door to further federal intrusion into state tax systems.

If the Senate approves the Marketplace Fairness Act, its prospects are not certain in the U.S. House, although some observers say those prospects are improving.

Two years ago, Connecticut passed an “Amazon Tax” that applies the state’s sales tax to online purchases shipped to Connecticut residents if the Internet sellers have marketing affiliates located within the state.

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.

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