Brick and mortars are tired of being saddled with state taxes while online businesses get off Scott free. While some states do require Internet-based merchants to pay up, two bills are in Congress that would make this universal in all states.
While it likely won’t be settled until after the election (who wants to be seen supporting a tax raise as November approaches?), it is assumed both Mitt Romney and Barack Obama support this move. In 1992, the Support Court ruled that online state taxes would place an undue burden on retailers that do not have a physical presence in their communities.
In support of the tax, a group of states have united to create the Streamlined Sales Tax Project (SSTP), with the goal of tax simplification, which big-name online merchants such as eBay say doesn’t address their needs. More than 24 states support the campaign. Proponents of the project cite the uneven playing field between brick and mortars and online merchants and the harm caused to local economies as reasons for their necessity.
Ebay contends that the SSTP does little to streamline, citing the many jurisdictions and tax rates and compliance issues that will still exist. They also believe the move negatively impacts job creation and creates more burden on these merchants in an already adverse economic environment.
Online merchants accounted for 7 percent of retail sales last year, and many believe that big-name online merchants such as Amazon and eBay are squashing small brick and mortars.
As far as how the candidates stand, Romney passed online sales taxes in his last term as Massachusetts governor. In fact, his potential chief-of-staff, Utah governor Michael Leavitt, is known as a strong advocate of the tax.
Meanwhile, the question remains: Would Obama would support such a tax? While he hasn’t made any statement on the issue as Election Day approaches, his supporters in Congress are back the tax, and it is assumed Obama does as well.
To date, the Internet Tax Freedom Act (ITFA), renewed to be active until 2014, protects online merchants from extra or discriminatory taxes. However, it doesn’t preclude state and local governments to charge sales tax.
On June 29, Texas joined five other states that Amazon has agreed to collect taxes for. The other states are Kansas, Kentucky, New York, North Dakota, and Washington. Within a year and a half, the number is expected to more than double to 13.
