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Is Internet Shopping About to Get More Expensive?

by on April 16, 2013

Online Shopping

Have you ever gone shopping at a local store and used your smartphone to check for better prices online? Maybe you even busted out your credit card and bought the item online, right there from the store. Chances are, you’ve done this a time or two – and chances are you did find a better price on the Internet. Pretty soon, though, thanks to a bill called the Market Place Fairness Act, you could see an online price hike. It’s passed the Senate, and if it passes in the House too, states will soon be able to collect sales tax for online purchases.

As it stands now, online sellers are required to collect sales tax from in-state customers. If a customer in another state makes an online purchase, the retailer only has to collect taxes if it has a physical presence – like a store, warehouse or office – in the customer’s state. A couple of states currently do tax out-of-state purchases, but they require that the individual pay up when filing his or her taxes – something that no one does.

So on the vast majority of online sales, no taxes are paid. Businesses that rely primarily on sales at brick-and-mortar stores feel that this gives online retailers an unfair advantage, since they’re able to offer products at a lower overall price. And this also means that billions of potential tax dollars are lost each year (anywhere from $11 to $24 billion, depending on who you’re asking.)

The Market Place Fairness Act aims to fix both of these problems by simply enabling states to collect taxes on online purchases. If the law goes into effect, it won’t impose any new federal or state taxes. If you reside in a state that lacks a sales tax, you still won’t have to pay it. But regardless of where you live, easy online bargain shopping is going to take a hit.

Of course, while big businesses like Wal-Mart and Amazon are all for The Market Place Fairness Act, small online businesses are less enthusiastic. It’s easy for large corporations to take the financial hit, but it’s tough for small businesses, and many could go under. Though the bill includes a provision that exempts businesses who do under $1 million in sales each year, many feel that this provision will protect few companies. A million in sales doesn’t typically amount to much in profit.

The debate surrounding this issue is a heated one. Most experts believe that paying taxes on online purchases is inevitable, whether it happens now or a couple years down the road. Enforcement of after-the-fact sales tax collection for online purchases has been spotty in the past, but lately the feds have been cracking down on it. If this is happening, it seems both likely and logical that they’ll streamline the process by simply having you pay the tax when you make the purchase.

Like it or not, it seems that taxes on Internet purchases are inevitable. What do you think of the Market Place Fairness Act? Let us know your thoughts in the comment section.

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