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Senate Passes "Online Sales Tax" by 74-20 Vote

Senate Passes

The Marketplace Fairness Act, also known as S743, cleared a key hurdle today when it passed the Senate by a vote of 74-20. If some version of it passes the House of Representatives and it is signed into law then millions of Americans may have to start paying sales tax on their Internet buying sprees.

The bill will require companies with annual sales of $1 million or more to start collecting sales tax on purchases. This has been a thorn in the side of brick-and-mortar retailers since they have always had to collect sales tax in states where they have a physical presence. Amazon which until recently opposed the collection of online sales tax currently collects taxes in nine states.

This isn't necessarily a new development since consumers have been required to pay sales tax on Internet purchases for a while. Until now however, there has been no way to enforce the requirement and effectively collect taxes from online retailers.

"We've had a lot of innovation in the online space, but federal laws have failed to keep pace," said bill supporter Sen. Mark Udall (D-CO). "Today nearly one in ten sales occur online," and the lost sales tax revenue is hurting state coffers. "It just makes common sense... the Marketplace Fairness Act is about equitable treatment for all sales."

Opponents of the Marketplace Fairness Act feel it forces Internet retailers into the role of tax collectors for other states. Senator Ron Wyden (D-OR) is in favor of "voluntary compacts" for collecting sales tax as opposed to a law forcing compliance.

An Internet sales tax has been coming for some time as more retail purchases have shifted online. The lack of sales tax was historically viewed as necessary to support a burgeoning Internet industry but has come under increased scrutiny and received criticism since it is viewed as providing an unfair advantage.

Image by: K Latham