Earlier this week, I received an email from Ebay regarding S.743, the Marketplace Fairness Act of 2013, a Senate bill otherwise known as the 'internet sales tax bill.' The email urged its readers to sign a petition to Congress to have the bill defeated. The bill, along with its House counterpart, H.R.684, is still in its preliminary stages, and is just beginning to be debated in Congress. It would require states to collect sales tax from online sales purchases from any non-exempt seller where the final sale destination is within that state. In other words, inter-state online sales tax.
Currently, sellers have to charge sales tax in a state if they have nexus within that state (they must have an actual physical presence in the state). For example, take Newegg.com and Tigerdirect.com. Newegg has a physical presence in CA (it is headquartered in SoCal), while Tigerdirect does not (it is headquartered in Miami, and has warehouses in the midwest/south). If a Californian were to purchase the same computer component from both sites, they would be charged sales tax by Newegg, but not by Tigerdirect. All else equal, this presents a huge incentive for people to buy from Tigerdirect.
The current system is essentially an honor system. If you purchase something in-state, online, you will be charged sales tax. However, if you live in a state that charges sales tax, and you purchase something online from an out-of-state seller who doesn't charge you tax, you are supposed to calculate the sales tax, report it, and pay it yourself. No one does this. It's an immense hassle, and as the world goes digital, it seems remarkably backwards to expect people to do their taxes the old fashioned way for electronic sales.
Overall, I think the basic idea behind the bill is sound, but I'm worried that the implementation might not be. As it stands, the bill contains exemption clauses for small business, and there is debate on what to do for states that don't charge sales tax. It's possible that this bill would simply complicate an already convoluted tax code. I also think that the directionality of the sales tax is wrong. The sales tax is being charged for the buyer state, not the seller state. This seems counter-intuitive to what we experience everyday. The state where the transaction takes place determines the amount of sales tax to be charged. This bill would reverse it, and would charge the sales-tax for online sales based on the destination/buyer state. A change this big and this sweeping could change the e-commerce landscape drastically.
Links:
Library Of Congress - S.743
Library Of Congress - H.R.684
Ebay - Petition To Congress
CNET - Internet Sales Tax Bill
No comments:
Post a Comment