The Proposed Internet Sales Tax – The Main Street Fairness Act

State and local governments have been trying to institute an internet sales tax for years. The Main Street Fairness Act introduced to Congress may make that a reality soon.

The internet sales tax issue is one that has been debated for years. On one hand, the states say they should get sales tax on sales made to their citizens just like brick and mortar companies have to pay. On the other, internet retailers note there are over 8,500 tax jurisdictions in the United States which makes figuring out and paying the taxes a huge burden.

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Where do the courts stand on these issues? Well, there is no single answer. The various efforts by the states simply have not wound their way up to the higher courts yet. There is precedent from the catalog industry, however. In the 1970s, the Supreme Court issued a ruling stating that just because catalog companies sold to someone in a particular state, they didn’t have to pay sales tax on such sales due to the burden of there being so many different tax jurisdictions.

The proposed Main Street Fairness Act is a Democrat initiative to deal with the burden argument. It works by creating a streamlined reporting method. States must abandon their own approaches and agree to comply with the form to take advantage of the Act. If they do, then internet sales to anyone in their state will necessitate the collection of sales tax by the retailer in question.

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This all sounds fine for the Amazons and eBays of the world, but what about the little guy? To help small retailers with the burden, a minimum sales figure will be required to be hit before sales tax must be collected. In the past, this figure was $1,000,000 in gross sales. The current Act does not detail an amount, but suggests a board would set it after taking testimony.

Will the Main Street Fairness Act be passed by Congress and signed into law by President Obama? It is hard to say if this specific bill will make it through, but sooner or later one like it will become law. Given the current financial straits of state and local governments, I’ll suggest this bill makes it through and becomes law.

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