A Sales Tax May Soon Be a Part of Your Internet Purchase

Just now getting around to some stories in magazines that were released earlier in the month, and this is a fascinating one. Back when e-commerce first took off (late 1990s), online retailers were generally exempt from having to collect sales tax for sales to customers where sales tax is charged (45 U.S. states and the District of Columbia). For instance, Amazon.com based in Washington State was not required to collect sales tax from a customer who was located in Pennsylvania.

Much of this stems from a 1992 U.S. Supreme Court ruling that said retailers did not have to collect sales tax unless they had a physical presence in the state. While back in 1992 this decision primarily applied to mail order retailers, once online selling took off it was viewed as also covering that retail channel. This, of course, gave online sellers a nice advantage in terms of the final price customers had to pay.

But this arrangement it also raised concerns of state governments who rely on sales tax as a key revenue stream. Over the years, states have continually voiced their displeasure with this arrangement and have sought to enact legislation requiring online sellers to collect sales tax. According to this story, states may soon get their way as a bill called the Marketplace Fairness Act may be up for a vote in Congress sometime soon. The impact this has on Internet retailing may be extensive and is something to watch.