Internet Sales Tax Bill Will Likely Pass

An Internet sales tax bill likely will soon be passed. The Senate is poised to pass an Internet sales tax bill with strong bipartisan support. Despite is weak public support and opposition from influential conservative groups, the Senate will still likely pass the Marketplace Fairness Act, or Internet sales tax bill.

The Marketplace Fairness Act wouldn't directly impose new taxes. Rather, state governments would have the power to collect Internet sales taxes that are technically already owed from businesses that are based outside of the borders of respective states.  Consumers are technically expected to declare those taxes on their state income tax returns, but few do.

A recent poll taken nationally by Quinnipiac University shows that the public by in large opposes the idea of an Internet sales tax. About 56 percent of voters said they think items and services purchased on the internet should not be subject to state sales taxes; 37 percent said they should be.

The bill's proponents say that brick-and-mortar stores are being hit hard by online retailers who have an unfair tax advantage. Online retailers are not currently required to collect sales tax owed on products people buy, even if the state technically requests it. Estimates for lost revenue from online retailers based in other states by the National Conference of State Legislatures top $11 billion for 2012 alone.  And, as the economy is suffering and austerity measures abound, that $11 billion could make a huge impact.

The legislation has been less partisan than usually seen in Washington. The bill was introduced by Sen. Mike Enzi, R-Wy., but its co-sponsors fall on both sides of the aisle, including Sen. Lindsey Graham, R-S.C., and Elizabeth Warren, D-Mass.

eBay, the bill's most vocal corporate opponent, says that it will hurt small businesses-a bit strange coming from the conglomerate, but a point that others have echoed. eBay Vice President Tod Cohen told CBS News: "These are very, very small businesses that employ less than 10 people, or even less than 20 people...And for them to take the amount of time and effort necessary to comply with all the laws, and more importantly to deal with the enforcement of those laws, puts them at a real disadvantage to their larger competitors."

Technically speaking, the legislation exempts businesses making under $1 million in out-of-state sales annually-but eBay says that's not enough to make an impact on small buisnesses. John Donahue, eBay's CEO, said the exemption should apply to companies making under $10 million in out-of-state sales at minimum. "We're not against an Internet sales tax," Donahoe said. "But the Internet sales tax has to work."

Much of the opposition for the bill comes from states that don't collect sales tax, such as Montana and New Hampshire. Sen. Max Baucus, D-Mont., said "Montana businesses are not responsible for paying for the services and spending priorities in other states. Montana businesses are not responsible for paying for fancy software to play tax collectors for other states."

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