Online Shoppers – Beware! Tax free shopping online is on the way out.

Legislation, named the Marketplace Fairness Act, would help states force online retailers to collect sales taxes so shoppers who go online for many of their purchases will see some difference next time they go to check out.  Specifically, the bill would allow states to require all Internet sellers to collect sales taxes for the state and local governments of the buyers.  State governments would be required to proved free software to these Internet retailers to calculate sales taxes.  Any online retailer with out-of-state sales of less than $1 million a year would be exempt.   This legislation is up for a final Senate vote on May 6th.

Proponents, like President Obama argue that the bill “will level the playing field for local small business retailers that are in competition every day with large out-of-state online companies.”  Additionally, proponents argue that the bill will help states who need this extra source of revenue.

Opponents predict a bookkeeping nightmare.  Online retailers would have to keep track of more than 9,000 sales-tax regimes.  Internet companies in states with no sales taxes – Montana, New Hampshire, Oregon and Delaware – would have to start from scratch to build a collection apparatus.

With growing support in the Senate, the bill looks likely to pass.  We will know more after the final vote on May 6th.

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