FindLaw columnist Eric Sinrod writes regularly in this section on legal developments surrounding technology and the internet.
A new effort is being made in Congress to impose state sales taxes on online sales. H.R. 5660, aka the Main Street Fairness Act, was introduced earlier this month by Rep. Bill Delahunt (D. MA.). The bill, if it were to become law, would authorize the collection of state taxes on Internet sales, even if a given Internet seller does not have a physical presence with a specific taxing state.
The bill says that "as a matter of economic policy and basic fairness, similar sales transactions should be treated equally, without regard to the manner in which sales are transacted, whether in person, through the mail, over the telephone, on the Internet, or by other means."
This bill goes on to provide that "States that voluntarily and adequately simplify their tax systems should be authorized to correct the present inequities in taxation through requiring sellers to collect taxes on sales of goods or services delivered in-state, without regard to the location of the seller."
The bill would allow those states that sign onto the Streamlined Sales and Use Tax Agreement to impose sales taxes on Internet sellers. This agreement already has been endorsed by a number of states.
While apparently some believe that online sellers currently have a commercial advantage when it comes to not having to pay state sales taxes when selling to customers where the online sellers do not have a physical presence, there has been a backlash to the Main Street Fairness Act, as occurred successfully to prior Congressional efforts to impose taxes on online sales.
Not surprisingly, the Computer and Communications Industry Association (CCIA) and some notable technology companies have expressed opposition to the bill. The argument is that in this poor economy, it would not be wise to saddle online sellers with sales taxes, especially, when the burden would be higher for such sellers than for traditional sellers, as the online sellers would need to obtain expensive professional help to sort through and comply with the rules of a number of different taxing authorities.
Of course, arguments on the other side include the need to raise revenue for taxing authorities for the benefit of the states they serve and the fairness notion set forth in the bill itself. The bill is supported by various retail and government associations.
Time will tell whether this taxing effort will gain traction when prior attempts did not succeed.
- Online Sellers: Amazon Tax Coming to California? (FindLaw's Free Enterprise Blog)
- "Amazon Tax" for California? States Weigh Sales Tax Rules for Online Vendors Using In-State Marketers (FindLaw's Free Enterprise Blog)
- The Surge to Impose Online Sales Taxes (Businessweek)
Eric Sinrod is a partner in the San Francisco office of Duane Morris LLP (http://www.duanemorris.com) where he focuses on litigation matters of various types, including information technology and intellectual property disputes. His Web site is http://www.sinrodlaw.com and he can be reached at firstname.lastname@example.org. To receive a weekly email link to Mr. Sinrod's columns, please send an email to him with Subscribe in the Subject line. This column is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.