The Future of Online Sales Tax Uncertain

Legislation concerning the sales tax on products purchased online has passed in the U.S. Senate and has been referred to a House committee.

Death and taxes are the only things that are certain in life but the future of online sales tax is still uncertain. The Marketplace Fairness Act, which is a bill concerning the sales tax on products purchased online, has passed in the U.S. Senate and has been referred to a House committee. This makes the future of many online retailers far from certain.

Since online retailers are not required to collect sales taxes, they can offer the same merchandise for less than brick and mortar retailers can, say traditional retailers. Collecting taxes from every destination they ship to is too cumbersome and will hurt online retail stores and consumers, putting many of the fledgling businesses out of business, counter online retailers.

However, some retailers such as Midwest Drum and Percussion in Wichita, Kansas see both sides of the argument. Midwest store manager Matt Jansen says he does about 10 percent of his sales online, mostly out of state, so no sales tax is collected for those purchases. “No one likes to pay taxes, but the truth is that as Wichitans and Kansans, we benefit from taxes to our state,” said Jansen. “The way it is now, we’re not just losing benefits as local merchants, but we’re missing out on tax dollars to fund roads, the city and parks.”

States lost more than $23.3 billion in 2012, according to National Council of State Legislatures estimates. That figure is expected to continue to rise as online sales continue to grow. This growth is much faster than the rest of the retail sector. According to ShopperTrak, during the holiday season online sales increased about 10 percent, while traditional retail stores increased less than 3 percent.


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