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New Bill To Make US Online Retailers Pay Interstate Sales Tax

posted 18 Apr 2013, 06:00 by Mpelembe   [ updated 18 Apr 2013, 06:01 ]

USA-Retail Sales Tax - New bill to make US online retailers pay interstate sales tax

 China Central Television (CCTV) - A controversial proposal that would make U.S. online retailers collect sales tax on transactions in states where these companies don't have a physical presence is currently under consideration in Congress.

Proponents argue the Marketplace Fairness Act will force online-only retailers to pay their fair share of taxes like physical retailers do, but e-commerce companies are saying the bill will impede their growth.

"NYC Fitness, Family and Finds" is a New York City-based online retailer on the e-commerce site eBay. Owner Kathy Terrill packages the orders she receives at home and frequently ships them off to destinations outside of New York State.

For now, Terrill only has to collect sales tax on items sold within New York, but the new bill may soon force her to exact sales taxes on transactions from buyers outside of her home state.

Terrill fears this could hurt her business and leads to an enormous amount of paperwork come tax time.

"[My current taxes] take about three hours quarterly. That's one state. With the sales tax I would be collecting from potentially 45 different states," said Terrill.

The Marketplace Fairness Act would require online retailers that gross more than a million U.S. dollars a year to start collecting sales taxes in the state in which they are selling to, just as brick-and-mortar retailers already do. But many small online businesses feel this could hurt their growth.

"Now maybe the competitive advantage that they felt that they had somewhat goes away, because now they have to start collecting the state sales tax," said BMO Capital Markets analyst Edward Williams.

The e-commerce giant eBay, which works with many small online retailers, says the proposal offers small online business little protection. In an online statement, the company wrote that:

"This legislation would force many small business owners to become tax collectors for every state across America and threaten them with audits and litigation in states that are thousands of miles away from where they live and work."

But online retailer Amazon, which previously opposed the move, has become more accepting of the bill recently.

"I think Amazon started just kind of taking a different perspective as they received a tremendous amount of pressure to start collecting online sales tax. And what their goal, I think, is, is to make sure that if they have to collect online sales tax, then everybody has to collect online sales tax," Williams said.

While both sides are arguing about how online retail sales tax should be implemented, industry analysts say it's an inevitability, not just because of how rapidly online shopping has grown, but also because states and local governments are under pressure to collect the revenue they need to keep things running.

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