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U.S. Senate Approves Internet Sales Tax

by Sean P. Aune | May 7, 2013May 7, 2013 8:30 am PDT


The United States Senate has passed the Marketplace Fairness Act by a vote of 69 to 27, and it will now move on to the House of Representatives where it is expected to meet more resistance.

Sales tax on goods sold over the Internet is currently only collected by companies for the states in which it has a physical presence, be that a retail store, warehouse or an office. If a company has a presence in Texas, it collects taxes for any sales made within that state, but none of the other 49 states where it has no physical operations. The Marketplace Fairness Act would make companies collect taxes for 45 states – Alaska, Delaware, New Hampshire, Oregon and Montana don’t collect sales tax – if its annual sales are more than $1 million a year.

While the new act passed the Senate without much trouble, the House is expected to fight back on it due to some Republicans viewing it as a tax increase. Should it pass it would still require the signature of President Obama to become law, but he has already stated that he is in favor of it, so his signature seems assured should it land on his desk.

The U.S. Supreme Court ruled in 1992 that a decades old law that covered catalog sales also covered online sales, and that was why sales tax was never applied except in the cases of a company having a physical presence. As states struggle to balance their budgets, and estimates show that $11.4 billion in potential taxes go uncollected, the government has become far more interested in passing some form of sales tax specific to the Internet.

No word as of yet as to when the House of Representatives will begin debating the act.

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...