Online shopping could become less popular if Congress passes a law allowing states to collect sales taxes on out-of-state Internet purchases.
Currently, online retailers only have to collect sales taxes in states where they have a physical presence, such as offices or warehouses, allowing customers in most states to realize an automatic discount of between about 4 and 10 percent on their online purchases.
However, a bill to close that loophole, called the Marketplace Fairness Act (MFA), is currently before Congress, which could act on it either next year, or during the current lame duck session. That bill already passed the Senate with bipartisan support, but the House has so far declined to vote on it. (RELATED: Costly Internet Tax Could be on the Horizon)
A spokesman for House Speaker John Boehner told Forbes that the bill “won’t move forward this year,” but noted that, “the Judiciary Committee continues to examine the measure and the broader issue,” leaving open the possibility that some version of the MFA could be voted on in the next session.
Harry Reid, on the other hand, “has vowed to do ‘whatever it takes’ to pass” the MFA in the limited time he has left as Senate majority leader, according to an op-ed in the Washington Times by Steve Daines, a Republican senator-elect from Montana who opposes the bill.
Daines claims that the MFA “would increase the average online shopper’s tax bill by $360 a year, taking more than $24 billion out of their pockets in its first year alone,” as well as increasing compliance costs for online businesses, which could “kill existing jobs.” (RELATED: The Marketplace Fairness Act will be as Hard to Implement as Obamacare)
Brick-and-mortar retailers, however, argue that their online competitors currently enjoy an unfair advantage, and say the MFA would merely “level the playing field.” Meanwhile, state government officials are salivating over the prospect of collecting their share of that $24 billion.
Earlier this year, famed supply-side economist Art Laffer even suggested that the MFA could enable states to adopt pro-growth tax reforms by using the additional sales tax revenue the law would bring in to reduce tax rates—something several states have already committed to do. (RELATED: Supply-Side Founding Father Boosts E-Commerce Sales Taxes)
And while there won’t be “a Cyber Monday surprise this year,” the Motley Fool warns that if Congress eliminates “the huge savings that many online shoppers have enjoyed for years… it could put a big dent in the massive growth of online retail.”
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