E-commerce sales tax bill moves forward in Senate

The U.S. Senate voted to limit debate on a measure that would require e-commerce retailers to collect local sales tax.

That means the bill, S. 743, will move to a vote later this week, perhaps as early as Wednesday. Today’s vote was 74-20, which suggests strong support for the bill, and that means it’s likely to be headed to the President’s desk.

Right now, there’s a patchwork of different state and local laws governing e-commerce. Technically, e-retailers are supposed to collect sales tax in many locations. In reality, not many do: In California, only 1.4 percent of online transactions included the required sales tax.

The bill, also known as the Marketplace Fairness Act, would impost a single federal standard requiring all retailers with more than $1 million in online transactions to collect the sales tax required by whatever locality the buyer happens to be in. States would have to do their part by setting up a single entity for sales tax collection and providing a single sales tax return form for retailers to use in reporting tax payments, greatly simplifying the process.

Despite those simplifications, many e-commerce companies are opposed to the bill. eBay, for instance, sent an email to customers yesterday asking them to oppose the act.

“Whether you’re a consumer who loves the incredible selection and value that small businesses provide online, or a small-business seller who relies on the Internet for your livelihood, this legislation potentially affects you,” eBay’s letter said. “For consumers, it means more money out of your pocket when you shop online from your favorite seller or small business shop owner. For small business sellers, it means you would be required to collect sales taxes nationwide from the more than 9,600 tax jurisdictions across the U.S.”

Naturally, bricks-and-mortar retailers line up on the other side of the issue.

“You have businesses all around America on Main Streets and shopping malls collecting sales tax on the things that they sell, competing with Internet retailers who do not,” Senator Dick Durbin (D-Illinois) said, as reported by Reuters. Durbin is a co-sponsor of the bill.

The Washington Post’s Wonkblog has an excellent explainer on the Marketplace Fairness act.

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