Members of the United States Senate voted Monday evening to pass the “Marketplace Fairness Act of 2013.”
The legislation would require all online retailers to collect local and state sales taxes. Currently, only e-tailers with a physical presence in a state must comply.
Wes Clarke, an economic expert at the University of Georgia’s Carl Vinson Institute of Government, said Georgia lawmakers passed a measure that went into effect in January to try to capture sales tax from more internet companies.
“It was expanded so that if they had a--what’s called a click through ad [they would have to pay sales tax],” Clarke explained. “So, if I’m a retailer in Indiana and I’m attracting customers in Georgia through an ad on a website that is based in Georgia--say a newspaper--that’s been interpreted to be a physical presence for practical purposes.”
The “Marketplace Fairness Act” would remove the federal requirement that a business have a “physical presence” and make it easier for states to collect sales tax.
Supporters claim the legislation would level the playing field for online retailers and “brick and mortar” stores.
Opponents, however, think the change would hurt small online businesses.
Representative Tom Graves, (R) Georgia, tweeted his opposition to the bill on Monday:
“States that want biz to be more competitive should race to the lowest tax rate, not impose new burdens on competitors&consumers #NoNetTax"
Despite some opposition, Clarke believes it is just a matter of time before the rules for online retailers change.
“With the estimates that are out there about the amount of money that state and local governments are losing to internet commerce, I think probably those days are numbered,” said Clarke. “It’s just a matter of can we get a bill through Congress and how do we administer the tax.”
The bill will now head to the U.S. House of Representatives.