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New legislation would do away with tax-free online shopping

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Say goodbye to tax-free shopping! Yesterday, the Senate voted for a bill that if legalized, will take away a nice perk we’ve all taken for granted while shopping online. This bill is called the Marketplace Fairness Act, which would force online retailers to tack on a sales tax for all online purchases. The bill will be voted on in the Senate for a final time on May 6.

The bill would change a 1992 law that didn’t require online-only retailers to pay a sales tax in states that require retailers to charge a sales tax unless this retailer had a brick and mortar store in the United States. Right now, how online shopping works is that if you’re shopping for something on BestBuy.com and Best Buy has a physical shop in your state, you’ve had to pay your state’s sales tax. However, if you bought something from Etsy, and the seller didn’t  have a brick-and-mortar location, you didn’t have to pay the tax. If the proposed legislation passes, you will start paying that tax. With this bill, the state you live in will collect taxes for everything you buy online.

There are big retailers supporting the bill, says the Wall Street Journal, including Wal-Mart, Best Buy, and Amazon. Obama threw his support behind the bill as well. It’s sensible that retailers being taxed already would support a bill that takes away the advantage that smaller, online-only outlets have over them. Many of these online-only retailers are able to cut costs by being available on the Internet only, and they also offer customers a tax-free options – clear advantages over big box and chain stores.

“Best Buy strongly supports the bill in Congress to level the playing field between multi-channel retailers and online-only retailers by allowing states authority to apply sales tax collection laws fairly to all sellers, regardless of selling channel,” a Best Buy spokesperson tells us.

She argues that the “retail environment” is far different from when the original laws were written – 1992 was a very different age for e-commerce. “Fair competition is good for communities and consumers,” the spokesperson adds. “Best Buy has seen signs of increased online revenue in states where Amazon.com is collecting sales tax. We expect that if Best Buy is seeing benefits from a level playing field then other main street retailers are as well.”

EBay is one retailing giant that isn’t 100 percent on board, though. While it’s not out to shut down the Senate bill, the company is looking for laxer restrictions to benefit its vast network of sellers since their are a few glaring issues for those on the opposing side of the bill. The bill, after all, could affect secondhand sellers that use eBay as an e-commerce platform. While the bill affects small e-commerce shops with more than $1 million in sales, eBay Chief Executive John Donahoe wants that threshold pushed up to $10 million.

“The campaign to expand Internet sales taxes has a lot of money, a lot of lobbyists and PR firms. They have a lot of resources. But their idea is not popular, and at the end of the day, you can dress a pig up but it still stinks,” Donahoe tells WSJ.