Online Sales Tax May Soon Be Reality

A new piece of federal legislation known as the Marketplace Fairness Act has passed the Senate and is now awaiting a House vote that most politicos expect to pass as well. If the bill becomes law, and your business conducts business over the Internet, you will be expected to collect taxes on all purchases and pay the state accordingly.

Currently, businesses that sell online, by phone or by mail already collect state tax from buyers who live in their own states or in states where the business has a presence. If the proposed legislation passes, all businesses that sell over the Internet would be required to collect sales tax for each buyer’s state and local governments.

Sound like a logistical nightmare for online sellers? Each state government will be required to provide free software to businesses to calculate state and local taxes. Businesses with out-of-state sales below $1 million annually would be exempt from collecting and reporting.

While opponents of the bill predict a bookkeeping and compliance nightmare (an estimated 9,000 separate sales tax entities would need to be accounted for, according to the New York Times), proponents of the legislation said it would level the playing field for brick-and-mortar retailers that must already collect sales tax and that often lose sales to online retailers because consumers don’t have to pay taxes.

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