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U.S. Senators Fire Up the Spectre of Online Sales Tax Yet Again

by Sean P. Aune | November 10, 2011November 10, 2011 9:30 am PST

Tax Free ShoppingOutside of the insanely easy convenience of doing your shopping online, the next best thing has to be the fact that in the majority of instances you pay no sales tax. Well, leave it to the federal government to want to rain on that parade.

A bipartisan group of 10 U.S. senators led by Mike Enzi (R-Wyoming), Dick Durbin (D-Illinois) and Lamar Alexander (R-Tennessee) have introduced a new bill that would see states being allowed to decide if they wish to collect sales tax from out of state retailers that sell online. Under the current law retailers are only required to charge sales tax in states where they have a physical presence such as an office or store front, and it is up to consumers to let their state know they bought something from out of state so that they can pay a “use tax” on it.  Not surprisingly, very few consumers actually do this, and cash-strapped states are looking to see how they can close this loophole.

The current plan calls for any state that wishes to join in on the law, should it pass, to streamline their tax code to reduce the impact on retailers who could find themselves with a mountain of new records to keep.  Any company or individual doing less than $500,000 in annual sales would be exempt from the law, so people who make extra money from selling items on eBay or making home made items to sell on Etsy would not suddenly find themselves filling out a mound of paperwork.

This isn’t the first time the U.S. Congress has toyed with the idea of an online sales tax, and while it has been shot down each time, this one seems the most agreeable yet.  In an odd turn of events, Amazon, who has fought sales tax collection on multiple occasions, came out in favor of the tax, while eBay, where the new law would impact only a small percentage of its sellers, was against it.

We’ll have to wait and see if this new proposal becomes law, but with it being left up to individual states to decide to enforce it, and most states in need of tax dollar infusions, it’s hard to imagine that this one won’t make it through.

Would paying sales tax curtail your online purchasing?

Sean P. Aune

Sean P. Aune has been a professional technology blogger since July 2007, but his love of tech dates back to at least 1976 when his parents bought...