U.S. Senate Introduces Another Internet Sales Tax Bill

This time they are calling it the Marketplace Fairness Act and it is the third bill introduced this year on Internet sales tax. In 1992 the Supreme Court ruled that states could not tax businesses that do not have a physical presence in that state. And, as happens when any law is passed, lawyers immediately set to work to try to find a way around it.
There have been various attempts, earlier this year California began enforcing new legislation that allowed the state to collect sales taxes from in-state “affiliates” of out of state e-merchants like Amazon. As expected Amazon immediately cancelled all affiliate contracts in California. This did not last long and California eventually backed down, and Amazon re-instated their California affiliates.
This new bill would permit states to pass an Internet sales tax if they streamlined their tax systems. Given the likelihood that any government could streamline anything there is little chance under this bill of any state enacting an Internet sales tax.
Of particular interest to small businesses is that this bill would exempt businesses with less than $500,000 in revenue. And while e-commerce giant Amzaon.com supports this bill, I have to wonder why. Retail giants like Wal-Mart have been pushing for an Internet sales tax, even the Simon Group, owners of hundreds of mega-malls have chimed in on this issue. And Amazon supports this new bill though I don’t understand why seeing that the bill gives a leg up to small businesses. I am of course supporting it because it gives an exemption to my small business, my store is under the $500k mark. It will help my online retail store to compete against the online super stores since I won’t have to collect sales tax from out of state customers.
For now it is entirely academic anyway. You first have to get the Congress to pass the legislation, in anything close to the current form. Then the participating states have to streamline their tax systems and then pass their own tax legislation. But small business owners should pay attention to this battle, assuming that all of this somehow comes to pass before I retire.

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