U.S. Senate passes bill to collect Internet sales tax

U.S. Senate passes bill to collect Internet sales tax

Summary: Internet retail transactions have long escaped taxation in the U.S. A new bill aims to plug the leak.

(Photo illustration: Andrew Nusca)

Late yesterday evening, the U.S. Senate passed legislation to force Internet retailers to collect sales taxes for state and local governments.

The vote was 69-to-27 in favor, and included senators from both major parties. The vote sends the issue to the House of Representatives, where it must be passed in the same form before it can be presented to the president to be signed into law.

The 11-page bill, called the Marketplace Fairness Act, allows U.S. states to force online retailers with more than $1 million in annual out-of-state sales to collect sales taxes from customers and remit them back to state and local governments. States will be required to provide software to help calculate the taxes.

You can read the actual bill, introduced in the Senate as S.743, here. The House version is H.R.684.

Today, U.S. states can impose a sales tax on products or services sold in that state, including those offered online; most do, some do not. Court rulings around the issue have required retailers to have a physical presence in the state to be subject to taxation.

The new legislation is interesting because it is a tax-related measure that divides the usual base of support for such things. Ideologically speaking, Republican legislators have long opposed most taxation efforts; on the other hand, the lack of taxation on Internet transactions comes at the expense of brick-and-mortar retail businesses, another area of support for that party.

Supporters see the measure as a way to protect government's right to collect taxes; opponents see the measure as yet another tax. Either way, it represents a major change in the way that the online marketplace has been functioning to date, and could trigger audits as businesses that engage in e-commerce come under further scrutiny.

President Barack Obama has indicated that he supports the measure, leaving House lawmakers with the final hurdle.

Topics: E-Commerce, Government

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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  • Article 1 Section 9, US Constitution

    "No Tax or Duty shall be laid on Articles exported from any State."

    The legislation would require a Constitutional Amendment, ratified by the states, prior to becoming enforceable.
    • Since when...

      ...does this administration care about the constitution?
      • No

        The truth is that the goverment is much more like that mob than a government for the people.

        The people who are running the federal governmet at the moment are a disgrace. The same thing happens to other business with absentee owners or incompetent managers. Probably about 60% of government employess would actually step up with the right management. Of the others, some only are there for a paycheck while the rest deserve to be fired. The good news for them is its not going to happen. The system lacks accountability.
        • Gpvernment is necessarily evil

          Just another example
          • One too many words.

            Drop the "necessarily" and you nailed it.
          • I do prefer states to...

            ...the freelance warlords who would inevitably replace them if they were to be abolished, but that may be a silly prejudice.

            Anarchism is a nice dream, but nature abhors a vacuum.
            John L. Ries
          • Anarchism, yeah right

            Despite all the tax they already collect they still bankrupt social security, medicare, medicaid, fannie & freddie, FDIC and just about a whole bunch of other programs. So your solution is letting them collect more? You know what the definition of insanity is? "Repeating the same failure again and again, and yet hoping for a different result."
          • The Feds are not the states

            Social Security, Medicare, Medicaid, Fannie & Freddie, and the FDIC are all the Federal government, correct? I think this country will be much better if the states do more and the feds do less.
          • age old

            this is an age old debate.
            I agree with you more state control and less fed intervention. Obama's socialistic dreams of power and glory (Obama care) just prove he wants to be another petty dictator like Hitler, Stalin and so on and is driving these morons (Congress) in the government to become a form of government the world has seen that never worked out.
          • Obama is more the problem than federal or democratic

            Obama is everyone's worst enemy in federal government -- not because his concepts are that much worse --but because Obama does not translate concepts to solid law. His laws pass out money and delegates even the most general details of what to do with that money to whoever receives it.

            No previous President was so naive as to hand huge sums of federal money out with no strings attached except "...this money is intended to improve X, please do something about it."

            People blame Republican bankers for taking bailout money...but remember two things:

            (1) republicans warned that the money would be stolen as the measure needed enforcement measures (acceptable processes, ways to measure success and penalties for noncompliance)

            (2) bankers lost faith in President and federal regardless of party, they all hoarded bailout one way or another. Republicans tended to greater panic and personal greed. Indeed most Republican bank executives expected total economic collapse within a year of bailout...thus their lack of concern for trying to bailout.
          • Federal Means ALL states

            So if "Social Security, Medicare, Medicaid, and the FDIC" were left up to States Discretion, that would be a GUARANTEE that we, who either need it or WILL need it at some time, will not get it. Screw the States, the States are not the US. All state lines should be removed with a scalpel.
          • One thing about the FDIC

            When was the last time your bank was protected by it? 1990?

            Since 2001 or so, MY bank has NO MORE FDIC protection. This is why, in 2001, Suddenly HUGE barriers were erected and ARMED guards were hired.
          • Bank choice

            bank obvious saw advantages to NOT being part of FDIC. That tells you that they hold an even smaller cash reserve than FDIC requires. Everything is out on loans. Or perhaps more cash is out on high risk loans than FDIC allows.

            Yes many banks are going more toward Vegas gambling and loan sharking rules. Bigger profits if great chances of losing it all.

            So in part you choose your bank with knowledge of that and therefore you accept their practices.

            But personally I would be concerned about bank options left to you. You might write to Congress and states(state banks) demanding depositors voting rights. That is that banks must put up operating choices to common depositor vote ($1=1 vote) each 6 months or quarterly if bank is allowed to state restrictions on dollar amount of change due to past obligations currently due.
          • Federal means the Union of Sovereign Republics

            American States are not the same thing as provinces of other countries. Each State is a sovereign republic. This is like saying all national lines should be removed and each country should become just another province of the U.N.
          • Maybe we need a good old fashioned Alien Invasion from space

            Maybe we need a good old fashioned Alien Invasion from space to get all of humanity united in the goal of common good. (Yeah, I grew up on Sci Fi)
          • Possibly

            If you then allow federal to have administrative regions based on various areas of responsibility.

            More direct voting for government representatives.

            And regular (weekly) popular national vote ratification for completed laws.

            Except that there are some laws that effect very local options of urban or local recreational or industrial development. That is exact positions of streets, parks, and business is seldom a national level issue.

            Would need to be some sort of hierarchy for physical planning of land and resource use -- with both upward and downward flow of demands. Obvious downward wins after a couple of iterations (the needs of many over the few). But local growth plans etc also need a chance to go up for consideration and modifications of original top level concepts.
          • Re: Federal Means ALL states

            So you would replace already highly beurocratic state governments with an uber-beurocracy 50 times worse? No thanks. It is a big country with diverse people and interests. Wyoming cowboys have very different views of government's role than do New Yorkers. I see no reason to attempt to force everyone to be the same.
          • New Jersey mob advertisement?

            States and localities? The lower the level of government the more intense the criminal corruption. But at least its someone you know and can easily kiss or feel their fist - right?

            Moving up to federal criminal corruption is less intense but when it occurs more widely spread.

            NO the Hallmark of Federal Government is WASTE and INEFFECTIVENESS. Too many competing interests and lack of acknowledgment that every bureaucrat belongs to one of those interests and may - given slack - slant things. That is too many federal executives have too much unmonitored independence and there is not much corrective feedback to original law.

            Plus federal process not only become impersonal due to numbers of citizens affected by programs - but that often becomes disinterest in fulfilling the federal mission to any given group or individuals (very important when services are only delivered to individuals).
          • Tea Farty Much?

            Because you're desciption "Repeating the same failure again and again, yet hoping for a different result." Trickle Down anyone? Oh, so if something is fouled up, the solution is always "Repeal Obamacare".

            Once the reast of the Tea Farters are voted out of office in 2014, this country will be in a better state in which to fix the problems left by Bush - A process which had begun in 2008, but was interrupted when Tea farters LIED themselves into office. They never wanted to fix the economy or make new jobs - THEY wanted to Religiousize the Government, wich is AGAINST the first Amendment, which governs MY rights to not HAVE religion in Government.
          • Keep spewing the lies

            We were doing fine, until DEMOCRATS got control of both Houses of Congress, which would include the House you bemoan as being the problem.

            The iron is hilarious, accusing Tea Partiers of wanting to HAVE religion in government (whatever that means) when the progressives in control of the White House and Senate and the media are pushing the green, Earth worship religion on the rest of us.

            FYI, there is no separation of church and state in the Constitution. The 1st Amendment protects the INDIVIDUAL'S right to EXERCISE his religion, and forbids the creation of a national church such as the Anglican church Henry VIII created.

            So, again, the closest thing to an imposition of religion on anybody is BY the gov't and the insane, anti-human green religion of Earth worship.