Are sales taxes finally coming to the Internet?
On July 15th, five senators introduced legislation on a bipartisan basis to make taxation of purchases made over the Internet a reality.
The legislation is called the Marketplace and Internet Tax Freedom Act, and it combines the efforts of two initiatives that had been separate before: The Marketplace Fairness Act and the Internet Tax Freedom Act.
On the one hand, the legislation would keep access to the Internet tax-free by limiting what state and local governments can do to impose Internet access fees – at least for the coming decade.
On the other hand, it gives states the unambiguous ability to enforce their sales tax laws on businesses selling to buyers located within their borders – including if those purchases are made online.
In other words, the 44 states that currently have sales tax laws on their books will be able to collect online sales taxes.
Not surprisingly, the National Retail Federation and other trade groups that represent brick-and-mortar retailing are lauding the actions of the five senators in introducing the legislation.
David French, the NRF’s senior vice president for government relations, noted that it’s high time “for Congress to eliminate the sales tax disparity, which disproportionally impacts community and independent retailers.”
Unlike in prior years when Senate and House lawmakers seemed incapable of coming together in support of sales tax legislation, this time appears different.
I think part of the reason is the sense that, at the end of the day, it just isn’t fair for offline retailers to shoulder the burden of collecting taxes – along with being at a competitive disadvantage – versus online retailers who benefit from being able to offer lower the same products at a lower overall cost, while also benefiting from lower overhead costs in most cases.
The fact that the current legislative bill is being introduced by senators from across the political spectrum as well as a diverse geography (the Northeast, South and Midwest) — tells me that the legislation will go through — and that the days of tax-free online shopping are numbered.
It will be interesting to see what the ramifications might be if and when the legislation passes. Will 24/7 armchair convenience trump the sudden 5%-7% higher cost to online consumers?
Those consumers can be notoriously price-sensitive … but they’re also creatures of habit and great lovers of convenience.
My prediction is that the new regulations will turn out to have little or no impact on the broader retail buying behaviors. If you concur — or if you have a different opinion — please share your thoughts with other readers here.