As e-commerce sales continue to increase at double-digit rates, state governments are asking Congress for a little help to generate revenue from sales tax. An estimated $20 billion in sales taxes slip through the fingers of state governments each year because online merchants do not have to collect or pay state sales taxes if they do not have a physical presence in that state.
At least 24 states have passed legislation simplifying the way sales taxes are collected. This would purportedly equalize competition between remote sellers versus “main street” merchants. Massachusetts introduced similar legislation last year, but it has not yet passed. Massachusetts could see as much as $300 million in uncollected Internet sales taxes if passed, according to some studies.
The National Governors Association lobbied the U.S. House Judiciary Committee last week saying the current law creates an unfair advantage when online merchants do not have to collect sales taxes. In addition, while there is a “use tax” for items purchased when no sales tax has been paid, sellers do not usually endorse it and buyers are not aware of it.
In addition, there is a Marketplace Equity Act of 2011 bill on the table in the House and sister bills in the Senate, which were drafted in response to the Supreme Court’s decision that laid the foundation of our current tax laws.
Opponents to the streamlined tax idea say that they do not properly protect small businesses and would be an expensive burden to family companies struggling to maintain their businesses.
To learn more about this and other tax controversies visit our Massachusetts tax law attorney page for one-stop legal help with your personal or professional tax needs.
Source: boston.com, “States ask help collection Internet sales taxes,” Andres Gonzalez, July 25, 2012