Marketplace Fairness Act: National Internet Sales Tax Explained

The Marketplace Fairness Act bill sounds harmless enough by the sound of it. But this bill is actually an attempt to implement a nationwide Internet sales tax in the United States.

As previously reported by The Inquisitr, the Marketplace Fairness Act is supported by companies like Amazon, Sears, Best Buy, the Gap, and Barnes and Noble. eBay believes the national internet sales tax to be a bad idea. In order to become statute the the Marketplace Fairness Act would also have to be approved by the House of Representatives.

While obviously brick-and-mortar stores would benefit from seeing internet only retail giants having to collect taxes, why would Amazon be joining them? Amazon VP Paul Misener wrote a letter supporting the Marketplace Fairness Act bill:

“ has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest volume sellers. [The Marketplace Fairness Act bill] will allow states with simplified rules to require sales tax collection by out-of-state sellers who choose to make sales to in-state buyers.”

Essentially, supporters of a Federal internet sales tax are pointing to the difficulty of implementing taxes state by state. Amazon has a “physical presence” in many states due to affiliates and warehouses, thus many Amazon customers are already being taxed for internet sales.

One good piece of news with the Marketplace Fairness Act is that small businesses which generate less than $1,000,000 in revenue will be exempt from collecting interstate sales tax. Essentially, this means small startup websites will have an easier time while everyone will still get taxed for the majority of online purchases.

So what is the overall picture to the Marketplace Fairness Act? The bill calls upon states to join the existing Streamlined Sales and Use Tax Agreement or follow five rules:

  1. Notify retailers in advance of any rate changes within the state
  2. Designate a single state organization to handle sales tax registrations, filings, and audits
  3. Establish a uniform sales tax base for use throughout the state
  4. Use destination sourcing to determine sales tax rates for out-of-state purchases (a purchase made by a consumer in California from a retailer in Ohio is taxed at the California rate, and the sales tax collected is remitted to California to fund projects and services there)
  5. Provide free software for managing sales tax compliance, and hold retailers harmless for any errors that result from relying on state-provided systems and data

What do you think about the Marketplace Fairness Act bill implementing a nationwide Internet sales tax in the United States?

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