Ecommerce Europe was informed by its sister-organisation shop.org, the online digital division of the US National Retail Federation that the US Senate, sided with traditional retailers and financially strapped state and local governments, last Monday 6 May passed a bill that would widely subject online shopping — for many a largely tax-free frontier — to state sales taxes.
The Senate passed the bill by a vote of 69 to 27, getting support from Republicans and Democrats alike. But opposition from some conservatives who view it as a tax increase will make it a tougher sell in the House. President Barack Obama has conveyed his support for the measure. Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state.
That means big retailers with stores all over the country like Wal-Mart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centres. As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.
Paul Misener, vice president for global public policy at Amazon.com, said before the voting already that Amazon was prepared to support the legislation. “We look forward to working with you and your colleagues to ensure the law is appropriate for states and for interstate sellers of all sizes,” he said in a letter to the Senate. “Software and services will make compliance easy for all but the very smallest volume sellers, which will be exempt under the law.” But others disagree, contending that the new bill still fails to address the challenge small retailers will face in calculating and collecting tax from thousands of taxing jurisdictions and remitting it to states.
The bill would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogues and through radio and TV ads. Under the legislation, the sales taxes would be sent to the state where the shopper lives.
“This bill and its companion in the House will level the playing field for all retailers – both online and offline – while safeguarding states’ rights. And the bill does it all without raising taxes, new government mandates or adding to the deficit,” NRF president and CEO Matthew Shay said. “Small retailers are collecting sales tax on the first dollar of any sale they make, and it’s only fair that other retailers who are selling to those same customers the same product have those same obligations. When brought to a vote, we believe the House will pass the bill and it will be signed into law.”
US online retail sales are expected to increase between 9.0% and 12.0% in 2013 over 2012, again outpacing total retail sales, which will increase 3.4%, according to the National Retail Federation, representing the retail industry trade. Both the NRF and Shop.org did not forecast any figure for 2013. However, Forrester, which organisation works closely together with Shop.org, recently forecasted online retail sales to go up 13% in 2013, reaching USD262bn.