Washington, DC – Today, the U.S. Senate is expected to pass the Marketplace Fairness Act, a bipartisan bill that would finally let state governments enforce their sales tax laws on purchases made over the Internet. Currently, retailers are only required to collect sales taxes from their customers if they have a store, warehouse, sales force, or other “physical presence” in the same state as the customer. In all other cases, online shoppers are required to pay the sales tax directly to their state government, but this requirement is unenforceable and routinely ignored. President Obama has indicated that he will sign the bill if it also passes the House of Representatives.
In anticipation of the vote, Carl Davis, senior analyst at the Institute on Taxation and Economic Policy (ITEP), issued the following statement:
“State lawmakers across the country will be celebrating today’s Senate vote aimed at ending the fiscal nightmare that online shopping has become. This vote begins to untie states’ hands in the fight against online sales tax evasion.
“Billions of dollars of revenue go uncollected every year because a court ruling from the days of floppy disks and dial-up allows online merchants to dodge their responsibility.
“We are not talking about a new tax here, these taxes are due by law. For the sales tax to work, retailers – no matter where they’re located – have to participate in collecting the tax from customers.
“State and local governments would have an additional 23 billion dollars a year to invest in education, infrastructure, law enforcement and other public services if they could collect online sales taxes due. Today they are one step closer to being able to make those investments.”
The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP's mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. More at www.itep.org.