The Joy of Tax-Free Online Shopping Is Under Government Threat

Oh, those salad days when you could shop and carouse online without any fear of the tax man; the days when you could safely take an Ambien and wake up to an inbox full of receipts from various internet retailers and think yes, I really did by a to-scale replica of Iron Throne, but, hey, at least I can skip out on those pesky sales taxes — those days are done. They are over. The government will vote and they will most certainly decide that you still owe your share. And so ends this wild era of ostentation.

Later today, the Senate will vote on (and likely pass) a bill that will allow states to collect sales taxes on purchases made online. Technically, Americans have always been expected to make up for these unpaid sales taxes when filling out their annual state returns except for — unsurprisingly — nobody wants to do it so the rule, more often than not, goes ignored.

The way online sales taxes currently work is that legislation only requires you to pay them if the store you are buying from is based in the same state as you reside in. Under the new law, spearheaded by Sen. Mike Enzi (R -Wyoming) and Sen. Dick Durbin (D - Illinois), sales taxes would be paid to the state where the shopper lives.

Some online retailers like eBay are fighting the bill, saying that it hobbles small businesses. As of now, the legislation gives businesses that pull in less than $1 million a year from online sales an exemption. eBay, which hosts several smaller businesses, suggests that the amount for eligible exemption be bumped up to $10 million and be extended to companies that have fewer than 50 employees.

Lawmakers, alternately, say that the bill is to help small businesses, particularly the ones the do not have an online presence. Based on the way sales tax laws are now (before the new bill), says David French, senior vice president of government relations for the National Retail Federation, online stores are at a huge advantage.

“It’s putting pressure on the brick-and-mortar competitors and it’s putting pressure on state and local sales tax revenues,” he remarks. “It’s time for Congress to create a level playing field so that all retailers are treated fairly.”

Supporters of the bill assure that their new rules for collecting sales taxes will be easy for online businesses to comply with. According to a study by three business professors at the University of Tennessee, states lost $23 billion in the past year because of tax-free online purchases.

So prepare yourself, consumers — it's time to either pay your share or dump all of your recent Amazon orders in the Boston Harbor. The choice is yours.

Senate Bill to End Tax-Free Internet Shopping [Salon]

Image via Getty.