The Senate has passed a bill that will permit the collection of Internet sales tax. In an era when so few things are bipartisan, this was a truly bipartisan movement with a 69-27 vote.
As you probably know, Internet sellers generally don’t collect sales tax on purchases. What you’re supposed to do is tally up all of your online purchases over the past year and remit your estimated taxes based on that amount to your state each year.
After the Senate’s move, the bill now travels to the U.S. House where it meets an uncertain future. But clearly, the movement toward taxing Internet sales is gaining momentum.
This idea of e-tailers having an unfair advantage by not collecting sales tax does not create a level marketplace. I see virtue in requiring the collection of Internet tax. But I do have a problem with the bill that was passed.
The Senate set the threshold at which online businesses have to collect sales tax at $1 million. Now $1 million may sound like a lot, but in the Internet world, the actual revenue on that could be much smaller.
Plus, the Senate’s plan means that anybody earning $1 million in sales online is subject to every local tax in every jurisdiction where there is a sales tax. That’s unreasonable and it won’t even generate enough in taxes for the states.
I believe the $1 million threshold will turn small business successes into untenable operations, dealing with an impossible burden in figuring out how to remit all the confusing sales tax at all levels. It may even turn profitable businesses into money losers.
My hope is that the leveling of the playing field will ultimately start at a floor of $5 million or more a year — not $1 million.
For you as a shopper, everything stays status quo at this time. You can continue to do business as you have. But remember, you’re supposed to remit the tax anyway to your state, although nobody does that.